Investing for Children
Parents are finding it increasingly difficult to pay for their children’s education with university costs increasing significantly from 2012.
However, with a bit of forward planning and some sound financial advice, you can create a savings programme that will allow you to fund your child’s education without saddling you with a mountain of debt.
Funding School Fees
As with any investment, the sooner you start saving, the better off you’ll be. If you invest when a child is born, you could have 18 years to build up a sizeable investment on their behalf. Provided that you have a long period in which to save, your best option would be choosing an investment vehicle designed to generate strong performance over the longer term.
Use your ISA Allowance
Whatever you are saving for, you should always take whatever tax breaks the Government is willing to hand out. Individual Savings Accounts (ISAs) are the first types of savings vehicle you should be thinking about, especially if you are planning on saving over a long time period. You can invest up to £10,680 each year, in a combination of cash or shares, and you can transfer your ISA investment from one provider to another if you wish.
Collective Investment Schemes
This is a term that applies to a number of differently structured investment products that make money from investing in companies listed on the stockmarket. Of course with investments such as these, there is a greater risk involved than investing in cash or bonds – their value can go down as well as up. The real benefit of this type of investment is that the longer you stay invested the greater the possibility of real growth of your money.
OEICs and Unit Trusts
The most popular collective investment schemes are OEICS and Unit Trusts. Both are funds where individual investors purchase shares or units in a fund, along with other investors. The money is pooled together to buy equities or bonds, and the profits made on these investments are then divided back among the investors. Investors can choose from a wide variety of different funds from different product providers. Each fund will have its own performance objective, and will state the type of assets they choose to invest in and the level of returns they hope to achieve. Performance is not guaranteed, but if your investment doesn’t reach the required level to meet your needs, it is a simple process to switch to an alternative fund that you consider to be more suitable.
Investment Trusts
Although less popular than OEICs and Unit Trusts, Investment Trusts are also very useful investments for people who are looking for a long-term stable home for their money. Despite the name, Investment Trusts are companies listed on the stock exchange, but their sole purpose is to invest in other companies. Investors can purchase shares in the investment trust, and dependent in the performance of the companies they invest in, they can take profits in the form of dividends, as well as hopefully watching the value of the trust rise over time.
