Part Two: Funding your child's university years

Going to university can cost more than £7,000 a year when you take into account tuition fees, accommodation, food, transport and socialising. IFAonline asks top advisers what parents can do to save enough money to fund their child's further education.

Peter McGahan is managing director at Worldwide Financial Planning

Baby birds leave the nest after three to five weeks and it is a quick learning curve as they are lobbed out, 30 feet from the floor, with gravity as a friend.

Fortunately for me, I never lived in a nest and my parents were more relaxed than that about me leaving home.

At the ripe old responsible age of 18, students are faced with quite a bit of stress with examinations, plus the added costs of university, etc. The jury is out for many parents on whether or not they should be supporting them or indeed going through that level of stress themselves.

The student will need to consider tuition fees, accommodation and increased living costs - student bars aren't cheap if you are in there all day.

The maximum tuition fees are £3225 for the year, accommodation fees topple c£4,000 and the cost of books, beer and lentil casseroles on toast, is a further £4,000. Much depends on where you are but these are pretty much the average.

Of course there are means tested grants here, but it is widely expected a student will exit university straddled with £7,000 per year worth of debt. Why not? The government is vastly in debt so why should they be unfashionable?

Most parents decide to support their children with the students themselves having a part-time job to facilitate extra expenses. Those parents who have not saved, simply borrow against their house to support their new adult, whilst the forward planner will have saved in a tax efficient manner.

I like the idea of putting a lump sum into an offshore bond which (aside from a small element of withholding tax) grows free of tax. As a higher rate tax payer I do not want any further tax to pay, so in year one of uni I would assign a segment of my bond to my 'new adult', they would encash and the gain would be assessed against their income. As they have not used their personal allowance there would be no income tax to pay if the gain was less than the allowance.

This strategy could then be used right through university until the last year. At that point they could time it so a further encashment (perhaps even in a school gap year) could be used to create a deposit for a house.

Tax free growth, tax free distribution, debt free graduate who is a houseowner and a potless parent.

Everyone's happy, apart from Aviva who have pulled out of offshore bonds!

See tomorrow's IFAonline for views from Richard Cook of AVD UK