Do you worry about your child’s future? Spend several nights thinking about how will you be able to afford university fees? However, what if we tell you that you can start saving for your child right away with smart techniques to yield a fair amount of money for tuition fees and accommodation. You can also get your child involved in savings to help them learn the value of money.
An average cost of tuition fees in the UK is around 9,250 pounds per year for an undergraduate degree with a cap of 9000 pounds in line with inflation. The average rent for a month costs outside of London 79 pounds per week and costs rises to 187 pounds per week for London. If the additional cost of food, lifestyle, and travel is added, then it can add up to a couple of 100 pounds per month.
Basic tip: Open a Savings Account for them
Start by opening a savings account in a bank on your child’s behalf. As soon as they turn seven, they can start managing the account. Your kid can learn everything about savings. Invest 1 pound for your child till the age of 18 years. However, there are TWO TYPES OF ACCOUNTS: Regular Savings and Instant Access.
Instant access account can let you or your child withdraw or deposit money but with a lower interest rate.
A Regular Savings account lets you deposit some amount of money for a fixed amount of time. If you withdraw some money in between then, your regular interest rate will be decreased. These accounts offer higher interest rates.
Invest in bonds to get a higher interest
When you have saved a fair amount of money for your child’s future, you can think about investing in long-term bonds which gives a profit of 2.85% on a seven-year bond. Such bonds are offered by the Bank of London and The Middle East. Stick to 20,000 pounds as the maximum deposit for the current tax year.
An account should allow transfer in fixed-rate ISA. It should be duly noted that once these fixed-rate accounts are open, they don’t allow to deposit more money so parents should keep that in mind.
Another option is to invest in a short-term fixed bond. Once your regular savings account matures, you can move the funds in the short-term bond to yield a higher interest rate. An average fixed-rate one-year bond gives a profit of 2.35% rate on an 18-month bond.
Junior ISA or Junior Stocks
You can open a Junior ISA for your child where they can start using the account or withdrawing money once they turn 18 years. If your child has a Child Trust Fund, then you can ask the provider to transfer finances from CTF to Junior ISA.
Each child in the UK can have one Junior ISA and one Junior Stocks and Shares ISA till the age of 18 years. These are a good option for savings as these are tax-efficient and are not liable to Income Tax or Capital Gains.
Junior ISA is saved as a regular savings account, but the difference is that these are tax-free and the money is locked till the age of 18 years. For the 2020-21 year, the Junior ISA limit is 9,000 pounds.
Other Savings Plans for Children
Some mutual benefit organisations offer children savings plan where you can choose to pay for the plan between 10 to 25 years. You can invest money for the term you choose in a share-based investment fund. You can choose between 270 pounds to 300 pounds a year. If you continue to pay the amount for ten years, then your ward won’t have to pay income tax or capital gains for income.
There is always another way out
If due to any circumstances, you are not able to save money for college, then there is always an option of borrowing a student loan for your child when he gets ready for that moment. The interest rate is calculated based on the earning potential of students after graduation. There are different loan processes for students who belong from Wales, Scotland, and Northern Ireland.
- Students can apply for a loan from banks or direct lenders.
- Direct lenders offer loans for bad credit with no guarantor and no fees.
- The instant decision saves you from the hassle.
If anyone wants to borrow other types of loans like payday, personal, home loan, etc. then bad credit history won’t come in your way.
To give your ward a bright future, you must have college funds prepared when they are ready to leave for gaining higher education. You can choose any savings technique according to your feasibility. From opening a regular savings account to investing money in fixed-rate bonds, there are so many options to choose from.