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Students Starting University This Year Can Expect Total Annual Costs of £20,000

Posted in: Research Last updated: 17 Aug 2012

  • Living costs have increased 7% in the last year
  • Change in UK savings culture could help provide financially for children when they reach 18

The annual living cost of being a student will reach £11,000 for those starting university this year, according to analysis* by Family Investments, a leading children’s saving provider. The increase is equivalent to a rise of 7% as annual living costs increase from £10,186 twelve months ago to £10,929 today** - an increase of £743.

On a monthly basis students have seen their living costs increase from £848 in 2011 to £910 today. This increase does not include the new university tuition fees which take effect from September and will add a significant strain - up to £9,000 annually - to student finances. In total, students could find their time at university costs them as much as £20,000 per year, which is clearly out of the reach for many parents to fully fund, particularly for 3 or 4 consecutive years.

Rent is the biggest single living expense with the average student currently spending £165 a month on accommodation, up from £159 a year ago, that’s around 18% of monthly outgoings. Transport costs have increased 17% from £71 twelve months ago to £78 per month today and with the expected hike in train fares announced this week these costs could rise even further.

In 2004, when figures on student living costs became available, the monthly cost of living was £561, since then students have seen living costs rise by 62%, an annual increase of almost 9% a year. Food costs have seen the greatest inflation with expenditure rising 77% since 2004 rising from £44 to £78 a month.The issue of tuition fees dominates current discussion of student finances but this is only part of the picture as rapidly rising general living expenses are also having a big impact on the affordability of a university education. If the cost of living continues to increase at current rates, those students starting a degree in 2012 may see annual costs hit £13,159 by the time they graduate in 2015***. The increase of £2,230 compared against today’s costs, would be a significant addition in its own right and students will be hoping that falling inflation rates eventually filter down into their living costs.

Kate Moore, Head of Savings and Investments at Family Investments said, “Figures reported last week indicated there were 15,000 fewer university applications for places starting this year. The impact of significantly increased tuition fees is clearly being felt and is acting as a disincentive for many who would otherwise apply.

"Figures reported last week indicated there were 15,000 fewer university applications for places starting this year."

“For those A level students hoping to attend university, the wait is over and they will now know if they have achieved the necessary grades. For many parents, the big question is how to finance such a cost at a time when they need to take into account not just tuition fees but very significant living costs too. With inflation creeping down towards target, students and parents alike will be hoping that this eventually filters down to their living costs.

“Of course, the huge increase in tuition fees will have taken many by surprise and left little time to save towards the cost. Taking a long-term view however, it would seem that these fees are here to stay so a shift in the savings culture in the UK would help parents prepare for the future, similar to the college fund savings culture of the US. Spreading this saving over an eighteen year period can significantly reduce the financial burden.

“One of the best ways to start saving early is through the Junior ISA, a new tax efficient savings account for children launched last year. Family Investments offer a Junior ISA that allows parents to save from as little as £10 per month. However, awareness of this product is fairly low amongst parents so we are urging the government to get the message out that it’s good to save from an early age and that Junior ISAs are an ideal way to do this.

“Family Investments research shows that parents need to be saving around the equivalent of their child benefit each month in order to cover student living costs through university. Smaller contributions will however go a long way, particularly if parents start at an early stage and allow for the potential impacts of compound interest or stock market growth.”

Student Cost of Living

   Total monthly cost of living  Total annual cost of living  Monthly cost of rent  Annual cost of rent
 2004  £561  £6,732  £122  £1,464
 2012  £910  £10,929  £165  £1,980
 2015  £1,096  £13,159  £186  £2,238

Estimated returns from an equity based investments product with an annual growth rate of 7%

 Monthly saving contribution returns  £50 per month  Child Benefit equivalent of £81.20
 8 years  £5,982  £9,715
 13 years  £11,225  £18,226
 18 years  £18,041  £29,300

* Based on analysis of ONS Family Spending Reports from 2004 – 2012. The analysis looked at the increasing/decreasing cost for each of the various spending categories and overall cost of living for students. The average increase/decrease in cost was taken to calculate the cost in 2011 and 2015.

** Annual figures assume the student pays costs such as rent 12 months of the year

***Based on the average increase in annual living costs between 2004-11

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