Saving for school fees from birth, Wesleyan?

Geography_rox

Hi,

With the arrival of our firstborn son a couple of months ago, my wife and I are already considering saving for senior school fees. I am lucky enough to work at a teacher in a well regarded school which gives a generous discount to staff, but I figure I will still probably need about £50k in today’s money by the time he starts at 14 to cover the fees (I don’t plan on moving!).

I am currently saving £300 a month into a cash ISA, which I realise is a terrible deal, so am looking at other options with a better return over that timeframe. I have looked at the Wesleyan with profits fund, which seems pretty good to me over that timescale as a mix of relatively low risk but with adequate returns, but for some reason I haven’t seen fully explained, people on here seem not to like it.

Could anyone give any advice? I’m particularly keen on a method that would allow me to invest monthly rather than needed big lump sums to make the investment worth it, but beyond that I frankly have no clue...

Thanks

Malthusian

With Profits funds hold back growth in the good years in order to keep adding bonuses in bad years. As global stockmarkets have more good years than bad years, on average they are designed to give less growth than a conventional unit-linked fund invested in the same investments.

The idea that they are lower risk is smoke and mirrors, because when stockmarkets crash they will fall in value just as a unit-linked fund would, via a Market Value Reduction, albeit possibly not as much as the equivalent unit-linked fund.

If you are prepared to accept those occasional drops in value then a conventional unit-linked fund is a better option, and if you are not then a With Profits fund is unsuitable and you should stick with cash. And pay more into it because the interest will not keep up with rising school fees over 14 years.

Any decent investment platform will accept a monthly Direct Debit so that is not an issue.

In about 14 years' time you should be wary of "pay the school fees years in advance for a discount" offers, as they are not remotely worth the risk.

Malthusian

The inherent contradiction is why With Profits is unpopular round here; if someone buys a With Profits fund today it is near-universally because they don't really understand it. Often because they are part of a captive audience who has been funnelled to an expensive product via a marketing tie-in and hasn't looked any further. Which is why you are looking at Wesleyan which spends a lot on marketing to teachers.

You however are looking further than that. People who hang around investment forums research what is right for them personally, and will very rarely conclude that it is With Profits.

Geography_rox

Many thanks for your incredibly clear explanation. You are correct that I was looking at them due to their advertising to teachers! It’s funny, I’m not actually all that risk averse over the long term, which surprised the advisor as he seemed to expect teachers to be much more into low risk funds, but what eventually persuaded me on the “with profits” was the fact that it performed better over 3 years than their more risky portfolio.

Sorry to take up even more of your time, but is there a particular fund that generally comes recommended? As I said I am happy with some risk in the portfolio, and for it to dip and rise, I guess I would just hope for an overall average of 5% p.a, which seems to be roughly how school fees seem to increase. For my purposes I don’t need very high reward enough to go for very high risk.

Thanks again

Geography_rox

Just to add, I see Vanguard 60 thrown about a lot. On the surface this seems to suit my aims, am I missing something major?

jimjames

Geography_rox wrote: »

Just to add, I see Vanguard 60 thrown about a lot. On the surface this seems to suit my aims, am I missing something major?

No you're not missing anything. It's a good fund at a low charge so suitable for those who are looking for an investment from a single fund.

xylophone

You could hold in a Vanguard ISA.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa?cmpgn=PS0617UKPABIS0001&gclid=EAIaIQobChMIv8yIkq-75wIViLbtCh2a_gNNEAAYASAAEgLG8fD_BwE&gclsrc=aw.ds

eskbanker

Geography_rox wrote: »

Just to add, I see Vanguard 60 thrown about a lot. On the surface this seems to suit my aims, am I missing something major?

https://en.wiktionary.org/wiki/if_all_you_have_is_a_hammer,_everything_looks_like_a_nail

fred246

You will pay for your child's education in taxes anyway. The best financial advice is to use that. Does it really matter who pays the teachers? Would you be a terrible teacher if the government paid you? We decided we would send our children to a private school IF we could see an advantage. We asked everyone who sent their child to a private school WHY they did it. We got nowhere. I am particularly grateful to a housemaster at our local private grammar school who was the most boring man you could ever listen to. The funny part that even educated people don't seem to understand is that they go by exam results. I would send my child to school X because it has better exam results. School X is a selective school that only takes the brightest children. Of course it will have better exam results. It WOULD be bad if it didn't.

Geography_rox

Fred246,

Before working here I would probably have agreed that private schools aren't worth the money, and indeed would still argue that most small day schools aren’t going to confer huge advantage. Equally, if your main metric for valuing an education is exam certificates, then you are right that a bright student will do well anywhere and that selective schools will always do disproportionately well.

In the best private schools however, the exam syllabus is a box to tick whilst teaching the subject (in our view at least) properly. Certainly with my year 11 at the moment we are looking at interesting material completely off the syllabus whilst I know that a lot of schools will have spent most of this term revising for GCSEs. Not only that but the wider opportunities beyond the classroom are quite outstanding, and in my view worth the money.

Anyway, on the topic of the thread, I have opened a vanguard ISA and will be putting the money I have saved and the ongoing £300 a month into their lifetime 80 policy, and then I will do my best to not look at it for another 10 years or so!

fred246

I assume you mean Lifestrategy 80. Sounds good to me. Are you planning to let your child suffer state education between 4 and 14 and 18 to 22ish and just pay for 4 years in the middle?