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This week marks 9 years since I started University. I had just turned 18, moved 600 miles away from home and, some may say, was annoyingly optimistic. One thought that didn’t cross my mind was student debt.
Luckily for me, my parents had planned in advance and I never once thought about how tuition, bills or petrol were getting paid. My Dad had worked tirelessly to make sure money wasn’t something that ever crossed his children’s minds – although when I was awarded a partial scholarship, I think he did an ‘internal happy dance’.
But not everyone is as fortunate. My husband for one. He’s the first of his family to go to University and took out massive loans to make it happen. Back in January I talked about how my husband and I combined our debt to pay it off by September 2020 – moving to a new house and a new dog has made that a November finish line and, while the loans will be paid off, his student debt will not. With a whooping £45,000 left to pay we decided to leave that sum for another day.
‘If you think education is expensive try ignorance.’ – African proverb
Students planning to go to university anticipate they will finish their course with average debt of £38,238*. I feel for these students because, much like my husband, it will be a necessary burden to reach their educational goals and for some, they’ll never repay the debt.
That’s scary. And it’s having even more of an impact on education ambitions today: research from the Association of Investment Companies (AIC) shows that the most common reason for young people foregoing University is concerns about paying for it and the financial impact of the coronavirus pandemic on family financial situations*.
Annabel Brodie-Smith, Communications Director of the AIC, said: “Regardless of high associated costs, going to university is still a key aspiration for many students and their parents. However, the average debt amongst graduates in 2018 was £36,000 and parents are clearly underestimating just how big a loan their children will leave university with.”
Education is a huge thing in our household. Not only is my husband a teacher, but we both hold Masters’ degrees and are continually taking online courses to expand our knowledge on a range of topics. (I may or may not look at PhD programs every few months…) The importance of education is something we feel strongly about passing along so, when we welcomed a new niece to the family in December, we talked to the parents about opening a Junior ISA for her.
The Junior ISA will be specifically earmarked for University and, although we can’t control how she uses the money in the future, I’m sure growing up with us around will be enough to convince her, and hey, she might just be the second of my husband’s family to go to Uni! Initially, we were the only contributors, but recently another aunt has decided to make contributions as well and her parents will start contributing once they’ve finished saving for their first house.
When you’ve got 18 years to invest you’ve got plenty of time and can afford to take some risk – including overseas equities. Baillie Gifford Shin Nippon investment trust, invests in Japanese smaller companies and focus on emerging sectors, or growth opportunities. The fund focuses on innovation and has an excellent track record, returning 770%** over the last 18 years. An initial investment of £2,500 would be worth £21,756 today**, and would more than halve a student’s debt.
First State Greater China Growth has returned 1,072%*** since launch in 2003 under manager Martin Lau. A £2,500 investment in this fund on day one would have turned into a pot of money worth £29,378***. Martin has more than two decades of experience running Asian and Chinese equity funds and looks for companies with good corporate governance across Hong Kong, China and Taiwan.
Technology has encompassed nearly every part of life lately and personally I see that trend continuing. AXA Framlington Global Technology has an unconstrained approach, meaning it can invest in any type of tech company. Each holding is exposed to one or more key themes that are expected to underpin the sector’s growth over the coming years and the fund has familiar names like Apple, Visa, Facebook and Amazon in the top ten^. The fund has returned 1,374%** over the last 18 years, turning £2,500 into £36,860** – enough to completely fund a university education.
Of course, with a long term horizon it’s also a chance to invest in future themes. Ninety One Global Environment is a unique fund that only invests in companies that are contributing to the decarbonisation of the world economy. The fund has had a strong start since launch in 2019 and I think we can all agree the climate change discussion isn’t going away any time soon…
And finally, Smith & Williamson Artificial Intelligence might be worth consideration for your long term objectives. With household names Ocado, Tesla and Microsoft^^, it’s not all robots in this fund. The managers look for companies which incorporate AI, instead of just making it, which means the fund has a more diversified approach to the growing theme.
*Source: AIC, 28 July 2020
**Source: FE Analytics, total return in sterling, 9 August 2002 to 10 August 2020
***Source: FE Analytics, total return in sterling, 1 December 2003 to 10 August 2020
^Source: fund factsheet, 30 June 2020
^^Source: fund factsheet, 31 July 2020