- A-Level results are out on 15 August.
- A three-year degree in England costs an estimated £67,000.
- However, HESA data shows people who graduated in 2021/22 earn an average of £27,500 a year.
- ONS data released in June showed that the average graduate earns £6,500 a year more than a non-graduate during their career. Over a 45-year career, this could add up to £292,500
- The latest edition of the HL Savings & Resilience Barometer (July 2024) found that those with degrees were more likely to have enough savings, enough cash left at the end of the month, to own their own home and be on track for retirement than those without.
- The Barometer shows that the impact is felt through the generations. If either parent had a degree, their children were better off than those whose parents had no degree.
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“As nervous A-Level students prepare to open envelopes that could change their lives, parents will be putting university plans into overdrive, and student finances will be at the forefront of their minds. They may wonder whether the massive loans and the huge strain on parental finances can possibly be worth it. Will all this study and debt really make a difference to their lives?
Statistically the answer, on average, is yes, absolutely. It’s not just graduates that benefit from higher wages and better financial resilience throughout the rest of their life, but their children will be more resilient too.
The maths around student loans changed dramatically last year, when the threshold income for making repayments was cut for new students to £25,000 and the length of time before the outstanding debt is written off was lengthened from 30 years to 40 years. This will significantly increase the number of graduates paying their debts off in full, so that around two thirds of them will. This is on top of the credit cards and overdrafts that mean an awful lot of graduates emerge from the hallowed halls carrying a deadweight of debt.
In return, graduates tend to get better-paying jobs. On average, according to the ONS, graduates earn £6,500 a year more than non-graduates over their career. For those studying subjects like medicine, economics, pharmacology and engineering, the difference is even bigger – with a degree super-charging your earning potential.
As a result, the HL Savings & Resilience Barometer shows that graduates are far more financially resilient than non-graduates on average. Higher earnings tend to mean more of them have enough money left over at the end of the month to be resilient – at 64% compared to 42% of non-graduates. Some 81% have enough emergency savings to be resilient – compared to 56% of non-graduates. They are also more likely to be on track for a moderate retirement income (56% of graduates are and 29% of non-graduates), and they’re more likely to own their own home (43% compared to 24% of non-graduates).
Through the generations
The benefits of a degree don’t just stop with you – they also pass through the generations. The Barometer looks at whether people’s parents went to university, and then examines their financial resilience. The financial resilience of the offspring of those with a degree is much better too – and only to a slightly lesser extent than having a degree yourself.
Having a father with a degree – compared to one who left school aged 15-18 means you’re much more likely to be on track for a moderate retirement (54% compared to 41%), to have enough emergency savings (82% compared to 68%), to own your own home (44% compared to 33%), and have enough cash left at the end of the month (65% compared to 53%).
Having a mother with a degree – compared to one who left school aged 15-18 – also leaves you better off on all four measures, savings (80% compared to 67%), surplus cash (65% compared to 52%), pensions (50% compared to 41%) and home ownership (40% compared to 31%).
This owes a great deal to the fact that graduates tend to earn more than non-graduates during their working life, and growing up in a better-off family tends to mean you will earn more yourself. This can come down to improving education – either by paying for it or supporting children academically out of school. It can also be due to improved work prospects from qualifications or being exposed to opportunities. Alternatively, it can come down to financial gifts passed through the generations helping make things like home ownership a more realistic prospect.
What can you do?
The fact that this financial investment is likely to pay off over the years doesn’t help right now. In the case of tuition fees and a portion of maintenance costs, this can be covered by loans, so the graduate can deal with the cost later. Plenty of students will also work alongside their studies in order to cover some of their living costs.
However, the vast majority of parents will still need to step in and cover the rest of their living costs. To make matters worse, the maintenance loan has fallen way behind rising prices. Students are getting poorer with each passing month, which threatens to take a toll on their studies. Families may need to step in to get them through an increasingly difficult part of life.
If you’re already contributing whatever you can, and you haven’t already spoken to the wider family about this, it might be worth considering. If grandparents had planned to give gifts later in life, they might be able to accelerate the process and help at a time when it can make a major difference.
Anyone who thinks there’s a chance their child might go to university at some point in the future should consider the finances as early as possible. One popular home for any savings or investments for children is the Junior ISA. It allows you to put aside up to £9,000 a year and it will grow tax free until they can access it at 18. By tying this money up, you can ensure they don’t dip into it earlier in their childhood, and still have what they need when they get to university age.
The earlier you start saving or investing, the better. If this seems like a stretch at expensive times in their childhood – including the early years – you can ask grandparents if they can step in while finances are tight, to give their grandchildren a real head start in their adult life. You don’t have to start with huge sums of cash. You can put in £25 a month, and get on the right track without breaking the bank.
You can choose to save this money or invest through a stocks and shares JISA, but investing is usually a more sensible option for the long term, and during 18 years of a JISA there’s usually plenty of time to ride out the short-term volatility of the stock market and take advantage of long term growth.”
