As the latest intake of students head off to university, parents with younger children may be reminded that the clock is ticking before their own children reach the same milestone.
Higher education doesn't come cheap, and new research from AJ Bell* has found that over half (54%) of parents with a child under 18 have saved or invested to help fund university or college costs. Two-thirds of these forward-thinking parents are currently saving or investing for this purpose, while the remaining one third have done so in the past but are not doing so at present.
Facing sky-high university fees, high rates of interest on loans, and changes to the terms of repayment, it is no surprise many parents want to earmark money to support their children with higher education.
After all, the government estimates that the average student loan balance for a higher education borrower entering repayment is £47,730 for 2025/26. That’s an eye-watering level of debt, and it’s no wonder some parents are trying to get ahead by building a financial safety net for their children before they start university or college.”
There has been a slight drop in savings habits from a year ago, when 67% of parents of under-18s said they were either saving for university costs or had done so in the past**.
The decline in saving and investing habits is surprising given the widespread negative publicity around the student loans system over the past 12 months, although short-term factors like the state of the economy and consumer confidence can see savings habits fluctuate.
How much have parents put away?
It’s important to start saving and investing as early as possible to truly relieve debt pressures on their children.
The median saved or invested by parents of children under 18 for university or college costs is £7,500. This would only make a small contribution towards education overheads. Parents already squirreling money away should be proud of their achievements, yet they might need to consider increasing contributions.
The data indicates an average parent saving money for children saves about £125 a month. You don’t necessarily need to be saving huge sums of money to get started building a university funding pot. Over one in five (23%) pay in less than £50 a month and half (53%) set aside under £150 a month. In some cases, those people will have multiple children.
If you’re thinking about setting money aside for your children’s education then the best thing to do is simply to get started. Don’t be daunted by the sums involved – remember, around half of parents aren’t saving at all so even getting going with a small amount each month is a good start, and even among those who are saving a large number are setting aside modest monthly sums in the double digits.
Investing small amounts regularly can deliver great results if you stick at it. For a lot of parents, it may be difficult to set aside large sums, especially if you have competing costs like childcare fees and a hefty mortgage. Once you get started, you can always increase contributions later if your financial position allows once the children get older.
Which accounts are parents using to save or invest?
Cash is the most popular way to save or invest for a child’s higher education. Of the respondents currently or previously putting money aside for this purpose, 48% said they use cash savings accounts and 44% said they used a cash Junior ISA.
It’s likely people are using multiple accounts, potentially holding cash in one and investments in another. One quarter (24%) have used a Stocks and shares Junior ISA.
It’s quite possible some people plan to use their own investment and savings accounts to support children too. You might set a small amount aside in an account in their name, but also have an eye on your own savings pots as a source of cash for helping your children in the future. Using your own adult ISA account means you have the flexibility to use the money as you see fit. You can take money out and gift it to your children if you choose, depending on their financial circumstances and what you can afford to gift them in the future. Both junior and adults ISAs benefit from tax free growth and income on the investments and savings. The key difference is that the junior account is in the child’s name – once you’ve contributed to them you can’t take the money out yourself if you need it.
The Junior ISA therefore offers a bit less flexibility, but does allow other people – such as grandparents – to contribute to the account knowing it is ringfenced for the child.
There’s nothing wrong with a mix-and-match approach, relying on both your own investments and savings to support children in the future, as well as having some money in accounts solely in their name, like a Junior ISA.
How much could a parent expect to make from saving or investing?
History suggests people with a long-term investment horizon could generate a better return from investing than holding cash. Putting money away little and often can be an effective way to build up a meaningful pot, particularly if you have five years or more to ride out the ups and downs of the stock market.
Some parents do not have spare money to set aside until their child reaches their teenage years. In these circumstances, they may be less willing to take investment risk if the money will be needed for university in fewer than five years. That’s understandable, but it’s important to remember that students do not need all the money on the first day of a three-year degree as the costs are typically spread throughout their studies.
Up to £9,000 can be paid into a Stocks and shares Junior ISA each year by family and friends. All the capital gains and income from investments inside the account are tax-free. The money belongs to the child and cannot be withdrawn until they turn 18, upon which the account automatically converts into an adult Stocks and shares ISA.
Low-cost global equity tracker funds are a popular choice for investors as they provide diversification via a basket of companies from around the world.
The table illustrates the returns from Vanguard FTSE All World ETF, one of the most widely held funds among AJ Bell Junior ISA customers. The returns are compared against a proxy for cash.
While there is no guarantee that the Vanguard fund, or any investments, will produce a positive return in the future, the past performance data does show what’s possible and how long-term investing can beat cash by a comfortable margin.
*Opinium surveyed 2,000 adults in the UK on behalf of AJ Bell between 28 August and 1 September 2026, of which 301 were saving to help a child’s university costs.
**Opinium surveyed 2,000 adults in the UK on behalf of AJ Bell between 29 August and 2 September 2025, of which 418 were saving to help a child’s university costs.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
