Saving For Your Children’s Education

Our Associate Advisor ‘Colin Davis’ recently contributed to an article for the Irish Independent. It touched on a subject that is quite relevant at this time of year as our children await their CAO offers.

The piece in the Independent can be viewed HERE  while the full content of Colin’s article is reproduced here:

HOW TO SAVE FOR YOUR CHILD’S‘ EDUCATION:

When it comes to saving for your children’s education, the most important thing to do is start early. Building a fund for a 5 year old is far more affordable than for a 9 year old – our figures show that you need to save approximately €80 per month more for the 9 year old than the 5 year old, to achieve the same target!

Saving ultimately boils down to 2 things; the length of time you have to reach your savings target and the type of investment growth you can expect over such a period. The shorter the time to save, the more cautious you need to be about where you put your money. This is because the assets that tend to give the best returns, namely stocks and shares, can be very volatile over the short term and it would not do to risk this money unnecessarily. For those with a longer period to save, you can afford to take slightly more risk, which should mean better returns.

For example:
If you want to build a fund of €51,000, which is the average cost of university (though there are big differences depending on whether the child stays at home or not), your monthly savings level would be as follows:

• If you have only 5 years to save, you cannot afford any risk. Therefore, at best, you could expect to earn 2% on your money. With that timeframe and return, you would need to save €807.57 per month
• Assuming there are 10 years to go, slightly more risk can be introduced, and that should give you returns closer to 4% per annum. The monthly figure therefore drops to €345.20
• Finally, if you are very sensible and start saving 15 years in advance, you can expect a decent investment return of 6% annually. With that, you only need to save €174.49 every month.

No matter the amount, we advise a simple savings plan that is not connected to your own current or deposit accounts. A regular Direct Debit to one of the larger savings companies is probably best to either shop around or have an independent advisor do it for you.

One important point to remember when taking out a savings plan like this (i.e. with a large insurance company) directly or through a broker is to specify that you want 100% Allocation. This instructs the company that all of your money is to be put into the fund and nothing is to be taken as commission or otherwise. If you want to use a Financial Advisor to find you a good plan, pay them a fee for their time.

Curran Financial Services offer access to a wide range of savings plans to suit all needs. Call us today on 091 861001 to book an appointment with one of our advisors.

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