Saving for university fees - long term

Pisces

Hi all

So with the fees now uncapped for university, my husband and I are preparing ourselves to at least part fund our son through university if that's what he wants. We're lucky - he's two, so we have a while to prepare.

Does anyone have a view on the best way to do this? We currently save £50p/m in a high interest regular saver Halifax in his name, and every year intend to sweep this into a best buy savings (lock in is fine). With birthdays and gifts he already has c£2k. We could potentially increase the monthly up to about £100.

Is this the best long term strategy or would an endowment (or something else I haven't thought of be better)? Clearly we're ok with a bit of risk for the next 5-10 years, but longer term we don't want too much risk as he approaches 18.

Thanks for any advice..

jonnyb

I am in a similar situation, with a 2.5 year old and a 6 month old.
I had posted this answer in relation to another savings question, but I think it applies here as well, so have pasted the main details.
You can always sell the shares when you want to de-risk, and put the cash away somewhere safe and boring.

With rates so low, stocks and shares is the better option, in my opinion.

Pick some "safe" FTSE100 companies, and invest in a stocks and shares ISA.
I'm using Selftrade, but III or Hargreaves Lansdown also allow self select ISA's I think.

Research companies who pay, or are likely to pay, a dividend of around 5%, and off you go. Make sure you opt to have dividend automatically re-invested, as it is a very low cost way to grow your ISA.

I'm putting money away for my kids in an ISA, using a regular investment of £100 per month, currently in Vodafone and Aviva, but will also be looking at United Utilities and maybe Tesco (Tesco divi is a bit low, but they are a safe bet in my opinion).

Nikel

You could try halifaxs Children's Regular Saver.

Loughton_Monkey

The purpose for saving is totally irrelevant.

All you are looking at is to provide for an amount of £X in 15/16 years or so. Whether this is for a lifetime visit to Australia, or to buy a boat doesn't matter.

You should simply save/invest as most people do, using all available tax wrappers as appropriate.

pauljoecoe

The purpose for saving is totally irrelevant.

No really becuase if its for your kids you can save in thier names (no tax) and get better rates sometimes.

Save as much as you can in the children names - tax free. There are often really good rates for childrens regular savers Halifax in particular.

We saved for both our children , plenty for our son now in his 3rd year at uni but my daughter is due to go in 2012 nightmare!!! Just when I thought we could start enjoying ourselves!

nettleby

pauljoecoe wrote: »

No really becuase if its for your kids you can save in thier names (no tax) and get better rates sometimes.

Save as much as you can in the children names - tax free. There are often really good rates for childrens regular savers Halifax in particular.

It's not as straightforward as that: there are strict rules as to how much a parent can gift their children, without it being subject to tax.

http://www.hmrc.gov.uk/tdsi/children.htm

pauljoecoe

The £100 rule (interest earned) applies separately to each parent. It does not apply to gifts given by grandparents, other relatives or friends.

So thats £200 interest per year (assuming 2 parents) You'd have to put away quite a lot at current interest rates to earn that and then there's all the 'relatives gifts' to add also:cool:

jimjames

pauljoecoe wrote: »

So thats £200 interest per year (assuming 2 parents) You'd have to put away quite a lot at current interest rates to earn that and then there's all the 'relatives gifts' to add also:cool:

Or £200 dividends. At 4.5% dividend rate on some funds you could quite easily get that with the amounts you'd need to be saving for university costs.

£10000 would generate £450 income which would be way above the limits. In an ISA this wouldn't be a problem but outside it could be. If the parent doesn't pay higher rate tax then there may not be an issue anyway.

dunstonh

university costs have typically gone up higher than inflation. So, savings options have historically not been considered suitable for those wanting to save for university. Investments are more typically used for this purpose. So, regular contribution OIECs /ITs(held in ISA if available) typically suit the purpose.

snowqueen555

Just bear in mind a lot of people won't pay off all their loan before it gets automatically wiped off (after 25 years).

9% of everything earned over £21k, sounds good to me, I don't even reach that threshold

Loughton_Monkey

pauljoecoe wrote: »

No really becuase if its for your kids you can save in thier names (no tax) and get better rates sometimes.

Save as much as you can in the children names - tax free. There are often really good rates for childrens regular savers Halifax in particular.

We saved for both our children , plenty for our son now in his 3rd year at uni but my daughter is due to go in 2012 nightmare!!! Just when I thought we could start enjoying ourselves!

That's exactly what I meant by "using all available tax wrappers".

You can be saving for University, Private School, Weddings, or a new car. Just get the best rates/tax treatment that you can within the family.