Top tips for the college fund

Top tips for the college fund

Not every child will go to college, but parents like to know the money’s there to give them the best start if they need it. Here are some tips on building a college fund.

The cost of higher education seems to be growing all the time – fees, the cost of living, the pressure of long term loans. But however our children’s lives might turn out, the fact is that more and more school leavers are being encouraged to take up some form of higher education, from intern training to full-on degree courses. All of these cost money, and whilst specific student loans can be repaid at a much more gradual rate, entering the job market already owing over £20,000 is not a happy prospect. So it’s understandable that as parents, we want to help where we can.

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It’s great if you want to start setting aside some money now to help your child when he or she leaves school, but can you afford it? (Bear in mind that parental financial support for students is means tested so don’t feel guilty if you cannot afford to pay into a college fund.)

Sit down and make a cold hard assessment of your incomings and outgoings. None of us can tell exactly what’s round the corner – from a boiler breakdown to a redundancy – but if there are major costs on the horizon that you do know about, factor these in.

Even if that leaves you with a small amount you can afford to save each month then great, it will soon accumulate.


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The right savings plan for you
Ideally you want the money you put into a college fund to go in regularly so it’s a good idea if this is a set amount which automatically goes into the saving account each month. Think about what is a reasonable amount you know you will be able to afford.

Make sure you pick a savings account which is easy to manage –where you can change the amount being paid in with one phone call, and one which allows you to add larger lump sums now and then when you might have more cash to top up with, without having to pay a few for doing so.

If your bank is offering good rates on long term savings accounts then you might find that managing your money all in one place will be easiest for you, but don’t presume that the bank you know best is automatically offering the best savings rates.

The best savings offers
A college fund does not require the day to day ‘in and out’ activity of a regular current account so you should be able to find one with better interest rates.

Shop around for good rates, but bear in mind that banks offering a short-term whiz-bang deal to get you onboard might not perform so amazingly over the five to ten years you are paying into this fund, so take a look at the company’s longer term track record on good savings.

ISAs: These are good long term savings accounts when you don’t need to access the money for at least five years. How well they do is affected by the performance of stocks and shares. The upside is that you are not paying tax on the interest or dividends you make on the savings. You can pay a maximum of £7200 a year into an ISA. Bear in mind that with this kind of account there may be a management fee charged by your bank.

National Savings: These are a safe way to save. You could take out a mini cash ISA (it would have to be in your name unless your child is already over 16); Fixed Interest or Index Linked Savings Certificates (for savers aged seven and older); or get Children’s Bonus Bonds (which can be invested on behalf of children under 16 and last  for five years).

Topping up a Child Trust Fund: Children born on or after 1 September 2002 all get a £250 voucher from the government (with an extra £250 payment if the family’s income is below a certain level). This money is then used by you to set up a Child Trust Fund account. This account is flexible in that you or other relatives can add up to £1200 to the fund each year. It is accessible once your child reaches 18.

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