Can investing help fund students through University?

As students head off to further their education, Richard Stone, chief executive at The Share Centre asks can investing help you fund your way through University?

Can investing help fund students through University?

The savings ratio, which is the amount households are saving, is at an all-time low of 1.7%. We all know we need to be saving more whether it’s to be able to buy a house, ensure we’re protected for ‘rainy days’ or to guarantee a more comfortable retirement – or can even afford to retire at all.

At the same time, this month thousands of students will head off to University knowing that they are about to embark on a journey which likely involves taking on around £30,000 of debt – and that’s just for the tuition fees. Covering the cost of living while at Uni comes on top of that and without the ‘Bank of Mum & Dad’ or a reasonable job, which can be hard to manage in addition to concentrating on studies, the numbers don’t look good.

Some smart investing could however, help solve both of these issues.

Many companies offer their shareholders ‘perks’ or ‘benefits’ generally in the form of discounts on their products. You should never invest solely for the discounts the company has on offer, not least as you may find your investment has fallen in value when you need to sell it and get your cash back, but looking around the market could help students get into the habit of saving and investing as well as providing some help with the costs of student life.

There are companies offering shareholder perks without requiring huge value investments in their shares which could help with everything from the cost of clothes to books and even food and drink. Here are some examples:

Company Discount and Products Minimum Holding Investment Cost
Bloomsbury 35% off Books 1 £1.66
N Brown 20% off clothes 1 £3.25
Moss Bros 20% off clothes 1 £0.92
M&S Discount voucher booklet 1 £3.23
Mitchells & Butler 12 discount vouchers giving 20% off food and drink 1 £2.55
Total     £11.61

Discounts and investment costs shown are correct as of 19/09/2017. These can change at any time. There will notably be the added cost of buying and holding the shares including dealing and accounting fees. Your capital is at risk and investments should not be made solely for the shareholder perks.

Books

Bloomsbury Publishing offers 35% off its books to shareholders. The minimum holding is just 1 share which would cost about £1.66. Bloomsbury offer a range of academic and professional books so this could be a real help to students faced with that first long reading list!

Clothes

N Brown Group which includes brands such as Jacamo offers shareholders 20% off its catalogue prices. Again the minimum holding is just 1 share which, at time of writing, costs £3.25. This could really help cut the cost of clothing.

In a similar vein, Moss Bros offers shareholders an annual 20% discount on full price items – again the minimum holding is just 1 share which today would cost just 92p. Marks and Spencer offers shareholders an annual set of discount vouchers – and again to qualify you need just 1 share costing £3.23 today.

Other companies such as Next offer a shareholder perk of a one-time only 25% off full price items. To qualify in this instance you would need to buy 100 shares which would cost nearly £4,500 at today’s price, making this obviously less attractive to students!

Nights out

Many of the brewing and pub companies offer shareholders discounts – indeed this is the one sector where such discounts appear the norm. However, the minimum number of shares required to qualify can make the cost prohibitive. For example, to get the 15% food and beverage discount offered by Fullers would require you to invest £5,000 in their shares.

More affordable are Mitchells & Butlers which offers shareholders an annual book of 12 discount vouchers each worth 20% off – the minimum shareholding required is just 1 share so would cost £2.55 at present. Moving up the scale Greene King offer an annual discount voucher booklet offering 20% off, and Marstons offer a blanket 20% off to shareholders but in both cases the cost of buying the minimum number of shares would be circa. £550. Notably, terms and conditions apply to these perks.

Other services

Insurers Aviva and L&G both offer discounts to shareholders holding just 1 share.

So, for less than the cost of a few drinks in the bar on the first night out you could be racking up savings on books, clothes, nights out and more. Of course, there are the costs of buying the shares and holding them, including dealing and account fees, to add in to the equation but through low cost brokers these should still not be exorbitant.

If you hold them through an ISA then any income (dividends) companies pay or capital gains will be tax free. Hold them through a Lifetime ISA and the government will even put in 25% of your savings as a bonus – although you will then suffer a penalty if you decide to withdraw the money before you retire (other than to buy a house)!

How to get started

One of the best ways to invest is to start with companies you know and understand. This can therefore provide students with a great insight into the world of investing, and perhaps even get them into the regular habit of investing if they bank some of those savings as a regular investment into their account. For parents and grandparents reading this article, how about giving a portfolio containing some of the above shares by way of a parting gift to the student in your family – it may be a gift which could keep on giving.

It would of course also be good to see more companies giving shareholder perks. This is not a one way street and the companies involved do it as they attempt to encourage greater loyalty from customers and more business as a consequence. It also gives a greater sense of overlap between the interests of shareholders and customers which should help improve corporate governance and management. Those companies offering perks but where the cost of entry to qualify is just too high – Next, Fullers, Whitbread etc. may consider lowering the threshold of shares required to help capture those customers earlier and encourage their loyalty through greater involvement in the company.

In short, there are ways out there to help manage the costs of student life, and the gift of a very modest share portfolio or the encouragement to invest in one early on, could make a substantial difference over the three years spent away at University.

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