A-Level results day (10 August) is a time of change and opportunity as teenagers across the country find out whether they have the grades they need for university. However, recent research from the Association of Investment Companies (AIC) conducted by Opinium shows that parents and students are both underestimating student debt.
Students planning to go to university expect they will finish their course with average debt of £37,803. This is close to the debt burden anticipated by students in their final year of university (£36,943). However, the average parent expects their children to leave university with debt of £24,852. All these estimates fall short of official figures which indicate the average debt of a student who finished their course in 2020 is £45,000.1
Two-thirds of parents (66%) are planning to help their children with university costs, but there is a large gap between parents from social grades ABC1, where 71% contribute or plan to contribute, and those from social grades C2DE, where the figure is 48%.
Parents are much more likely to use cash savings accounts for their children’s future than invest in the stock market. 59% of parents have used cash accounts, compared to 16% who have used investment companies and 15% who have invested in shares.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Despite the huge impact of the pandemic on students’ university experience, going to university is still a key aspiration for thousands of young people across the country. However, students and parents are both underestimating the average amount of student debt on graduation with parents particularly wide of the mark. This is despite two-thirds of parents planning to help finance their children’s university costs.
“Cash is the most popular way for parents to save for their children, even though ultra-low interest rates make real returns on cash savings almost impossible to achieve. Parents with time on their side might like to consider investing. Investing £50 a month in the average investment company over the past 18 years, £10,800 in total, would now be worth £37,648, enough for a young person to begin their career without a big debt burden.”
Monthly investment in the average investment company to 31 July 2021
| Duration | 5 years | 10 years | 18 years |
| £50 regular savings | |||
| Sum invested | £3,000 | £6,000 | £10,800 |
| Overall weighted average investment company (ex VCTs) | £4,191 | £12,308 | £37,648 |
| Duration | 5 years | 10 years | 18 years |
| £100 regular savings | |||
| Sum invested | £6,000 | £12,000 | £21,600 |
| Overall weighted average investment company (ex VCTs) | £8,382 | £24,620 | £75,296 |
Source: AIC/Morningstar. Share price total return to 31 July 2021.
Lump sum investment in the average investment company to 31 July 2021
| Duration | 5 years | 10 years | 18 years |
| £5,000 lump sum | |||
| Sum invested | £5,000 | £5,000 | £5,000 |
| Overall weighted average investment company (ex VCTs) | £9,291 | £15,961 | £41,672 |
Source: AIC/Morningstar. Share price total return to 31 July 2021.
