Parents' first lesson: save

By SALLY HAMILTON
Updated:

 

WHEN children win a place at a private school, parents may whoop with joy at their success - then wince at the large bills that await them.

The price of a private education rose by an inflation-busting 9.4% in 2004, according to the Independent Schools Information Service (Isis), with the average day school costing nearly £8,000 a year, and more than £17,700 for boarding.

Even if private education is out of the question, many parents face the prospect of university bills, which NatWest bank estimates top £26,000 for a typical three-year course.

It is thought that less than a third of parents plan ahead for education costs, leaving them to meet the bills from income. That hits their standard of living and often means sending a non-working parent back to work, or taking out a loan.

Cherlyn Miller, 43, a social worker from Catford, south London, is eager to avoid debt from university fees when her 10-year-old daughter, Carmelita, goes into higher education, and takes the view that saving is better than borrowing.

Cherlyn and her partner, Lee Wallace, 48, a builder, have been saving using stock market plans.

Financial advisers recommend equity-based investments, if parents have enough time to ride the ups and downs of the market. If they have less than five years until fees are due, the more cautious option of a deposit account is the only sensible choice.

Cherlyn says: 'I decided to start saving partly to make my daughter and myself more financially aware.'

The Miller family
Among the couple's savings plans is the Witan Jump fund. Cherlyn says: 'I chose it because it invests worldwide and charges are low. We invest part of our child benefit in the plan and top it up when we can.'

Matt and Lucy Allen, from Billingshurst, West Sussex, are also making plans to cope with big bills when their sons Sam, 6, and George, 5, move to private schools at 11.

The Allens have several savings plans, including a deposit-based account with Halifax and an equity-based individual savings account. They save £100 a month.

Matt, 38, managing director of a graphics firm, says: 'We have also set aside a sum for school fees, which is being used to offset our mortgage with First Direct.

'Not only is the money reducing the size of our loan and the repayments, but we are investing those extra repayments that would have been made in other savings plans.'

The Association of Investment Trust Companies has a guide to investing for children at aitc.co.uk or call 0800 085 8520.

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