Most parents think about their children’s future, and how they can help them out. If you have hopes for your children to attend University, it’s never too early to start saving for it. Being prepared early could help your child avoid the need for student loans later on.
The average student comes out of University with student debts of over £50,000. Factor in the cost of living away from home and University becomes a very expensive goal. The qualifications can make all the costs worth it, of course, but it’s a good idea to try and get some savings ready for them. Even with money saving at University, and purpose built budget blocks of accommodation like Fortis Student studios, your child is likely to need quite a bit of help.
Junior Cash ISA
Set up a Junior cash ISA for your child. You can put away up to £4260 a year, and your child will be able to access the money once they reach the age of 18. Regular savings in an ISA can really add up if you keep it up over a few years. Look out for the best interest rates, ideally over 3.5%. The main bonus of an ISA is that it’s tax free.
Junior Stocks And Shares ISA
Stocks and shares ISAs can have greater returns than a cash ISA. They are, however, also higher risk than a regular savings account. To counteract the risk, you should spread your investments across a few markets and sectors with decent prospects for the long term. The bonus you have with investing for education is that you have a long time for investments to grow before you’ll want to cash out. You have room to be a little more adventurous, as you’ll be less hit by short term swings in the stock markets.
Pension Lump Sum
If you’ll be 55 or over when your child enters higher education, you could pay for it with a pension fund. If you maximise the amount that you put into your pension now, you should have a healthy amount saved by the time University rolls around. Pensions are tax efficient way of saving, and currently, you can withdraw the first quarter of it tax free, giving you some cash to pay for University. If you go with this option, get advice from an accountant first, as you don’t want to be left short for your retirement.
Investing in offshore bonds means that you can use a bond as an investment vehicle to control when you pay tax, how much you pay and who you pay it to. Sometimes these are referred to as portfolio bonds or tax wrappers.
Bonds are set up by life insurance companies in countries with good tax regimes. This means that you investments benefit from growth that is mostly tax free. As long as the money, either as income or capital, doesn’t come into the UK, it isn’t subject to UK tax laws.
If you choose this option, be sure you are aware of the tax rules in the regime where you cash in your bonds. Get an expert opinion to help you manage the whole process, as this can be a risky choice.
You can set your children on the best path for their future education with some careful planning and smart saving. Savings for your children are a great idea even if they don’t end up using them for University. If they choose not to attend University, they can use the money you saved to put towards a house deposit, or the money to fund them through an apprenticeship.
It might seem silly to start worrying about saving for their future when your children are still in nappies, but the earlier you start, the more you will be able to save. With more time, you can put money away in small increments each year, and not have to go without while your children are small.
Before making any decisions, it’s wise to consult an accountant who can talk you through the various options and help you decide on what will be the best way to start saving for the family in the future. Check in with your accountant frequently so they can help you keep the savings going in the most sensible way. Keep paying in regularly and you should find that you have a very healthy amount of money saved up to help your children secure the best possible future for themselves.