Educational fund for children

P

padraigob

Guest
Hi,
can anyone please advise on the best and most secure option for regular saving for the future education of my kids. We are talking of an investment of approx 500 euro per month. Thanks
padraigob
 
There are two generic types of regular savings plan - deposit savings and unit-linked savings. The former is a type of bank account with a bank or post office. There's no explicit charge. You get the quoted rate of interest. For example EBS pay 4.1% AER for the first year on their regular saver account. Interest is subject to DIRT tax.

The unit-linked savings plan is a more complicated beast. There are usually charges, which can be a charge on each monthly contribution, a charge on the fund every year and often both. After charges, your savings go into one of the funds that the company offers. In theory, such plans have the potential to provide a better return over the long term than deposits. BUT - like any investment the greater the potential for return, the greater the risk. They might not produce a return greater than deposits and indeed they might drop in value.

Be wary of charges on unit-linked savings plans. They can be complex and hard to understand. Ask any potential provider for the "Reduction in Yield" figure. That takes all the charges and summarises them into one figure which represents how much of your annual return is being eaten by charges. For example, if the RIY figure is 1.5% and your fund achieves 6% growth in a year, you'll only see 4.5% of that growth because the charges have eaten the other 1.5%. For comparison purposes the sort of unit-linked savings plans we offer would have RIY figures of 1.5% or less depending on the amount of the savings and whether or not the client kicks off their savings with a lump sum. Growth is subject to Exit Tax and there’s a 1% Government levy on each contribution as you make it.

Neither type is categorically better than the other - it's down to personal choice. Do you want the certainty of deposit even though you have lower growth potential? Or are you prepared to take higher risks with your savings in order to have the potential for higher returns? Your advisor should go through all these factors with you.
Liam D. Ferguson
 
hello padraigob..

Myself and my wife are trying to do something similar,so we have decided to set up a direct debit of 650 per month into a 10yr government savings bond,so basically we buy a bond worth 650 every month for ten years with a return of 47% after it matures in ten years time...So after the last month in ten years time,we should hopefully be receiving around 955 back per month every month for ten years..so if you do your sums 650x12x10 = 78000 euro with a return of 47% = 114600 which is 955 per month after ten years, and that goes under the national solidarity bond if that means anything in todays climate..now obviously i dont have any idea of yer circumstance but it suits us to do it this way.hope this helps
 
Hi I am wondering what other posters think of the 4 and 10 yr govt saving bonds
I am also looking to save every month into a account for childrens education.
 
You must log in or register to reply here.
Back
Top