University Savings

[Walkthelakes]

I have started putting money away for my kids university fees in case they want to go. I have four kids and have worked out that I can afford to save up for me to give them £5000 per year if they do a three year degree. I’m saving around £300 a month. The oldest is twelve so have about 6 years to save for them; the youngest is two so obviously have a lot more time for them. This is the absolute most I can save. If they don’t go to uni I will probably save thr money and give them towards a house deposit or something.
my question is that seeing as it’ll be an ok sun of money and also that I will be keeping it in fjr a relatively long time, Whwt would be the best thing to do with it? Should I just keep it in a bank account? Or should I putting it in an ISA or maybe even paying the mortgage off with it and then having a shorter term less interest so I can then have more disposable income at uni time .

An ISA is definitely better than a regular bank account. You could do 50% in a stocks and shares ISA and 50% in a cash ISA.

I would put half in a stocks and shares ISA and the remainder in cash ISA. Assuming that worst case you could draw from the cash ISA if funds in the stocks and shares are down when you need to access them. If you can pay off your mortgage in 6 years and the interest rate is higher than savings interest rate I would also consider that and work out how much that would free up monthly to cash flow.

It's a great amount to be putting away and it's a good idea to be looking forward to university. As it currently stands the maintenance loans don't cover living costs, in many cities it doesn't even cover the cost of university accommodation.

I would be making sure that you are saving the money into the best accounts for interest. I would probably look into a regular saver to pay the money into each month and then move into ISAs, using a mix of cash and stocks and shares, at the end of each bonus period.

Something to consider re saving Vs paying some money of the mortgage is how much your saving potential will be when they are closer to university ages. It might be that by reducing the mortgage now means you can save more later.

I'd put it into a S&S ISA - I'd go for Investengine, set up a portfolio with maybe 60% global equity index funds (choose one with low fees and 40% Money Market funds like Amundi (very low fees 0.05%). The money market funds are a very safe investment and they will give better returns than a saving account and you won't have to keep chopping and changing to get the best rate - you can also take you money out immediately if it's needed.

You set up a savings plan and you £300 gets automatically invested in the quantities you specified - it's also a free platform with no trading fees.

S&S isa should be thinking of not touching the money for 3-5 years. So just about works for the 12 year old. I would be putting the next 18 months into that and reassessing how you feel about it in a year or so. then maybe adjust to half cash and half S&S if you’re nervous but I’d push for almost all S&S. put it away and don’t think about it monthly but check in every 12-18 months and adjust.

Saving in cash for 6-18 years would be madness : the vast majority should be invested eg in a stocks and shares ISA

Thanks everyone. This has been really helpful. It’s a stretch to save but I’m managing it and it feels like a positive thing to do. It came from a conversation with my partner where he said that maybe we wouldn’t be able to afford for them to go to university—-and I thought I wanted to do everything I could to make sure that if they want to go we can at least partly support them. I know £5000 a year won’t pay for everything but it will help, and I worked through university so don’t see it as a terrible thing. Previously we have saved to move/ house deposit / stamp duty but that money was saved for a specific purpose and we used it quickly. I know that just keeping money in a bank account is not the best thing but have been a bit clueless.

Sorry —can you clarify what you mean by the bonus period?

I have been thinking this. In a couple of years we remortgage off our 1.2% rate and I was thinking that the £300 overpayment per month would mean that we would have more money to help out during the university years—-although not a lot to take it out of.

So most savings accounts offer a better rate for the first 12 months and then drops to a rubbish rate. It's important to be aware of when these rates drop. For example I have a regular saver which I can put £300 each month at 7% for 12 months after that the rate drops significantly. I save into that account and then move it into somewhere where I'll get a better rate.

If you have a lump sum you are better off putting the money into an account with better rates as the drip feed in means you don't get 7% on the lump sum. You get 7/12% on the total each month which averages out as about 4% so you would often be better putting it in a fixed account or a stocks and shares ISA.

I'm risk averse and until recently haven't been a position to put money aside for the longer term. My approach has been to have a regular saver once that matures move it into an easy access saver. Once that amount has built up move some of that into fixed savings accounts, using ISAs as much as possible and I'll now move to looking at stocks and shares.

In your position I'd open a regular saver asap start putting the £300 in with decent rates. It would also be a way of being sure the £300 is sustainable. You can then do your research into stock and shares and work out what you want to do and then start moving money some money into stock and shares ISAs. I would probably split the money between stocks and shares and fixed /easy access accounts as you can then make a decision when your mortgage deal comes to an end you decide whether it's more beneficial to keep the money in savings Vs paying off some of the mortgage. If your mortgage rate is 1.2% you don't want to be actively overpaying at the moment as long as that money is in savings that gets more than 1.2%