SAVING FOR COLLEGE

WHEN saving up for your child’s college education, it’s important to choose the right savings or investment product. “The less time you have to save, the more cautious you need to be about where you put your money,” said Colin Davis of Curran Financial Services. “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. Those with a longer period to save can afford to take slightly more risk — which should mean better returns.” ÷ BETWEEN TWO AND THREE YEARS TO SAVE Should you only have another two or three years to save up for your child’s college bills, your chances of saving up the full amount needed by the time he or she starts college are slim. However, you should still save what you can as this will ultimately reduce the amount that you might have to borrow to cover the bills. “Once you are saving for less than five years, deposit accounts are really your only option,” said Eoin McGee, principal of the Kildare financial advisers, Prosperous Financial Planning. McGee recommended KBC’s Extra Regular Saver account for parents who have up to three years to save for college bills. This account pays 2.5pc interest on up to €40,000 of savings. However, to qualify for the interest rate on the Extra Regular Saver account, you must have an Extra Current account with KBC and lodge €2,500 into that current account each month. You must save between €100 and €1,000 a month into the Extra Regular Saver account. John Lowe, the financial adviser and founder of The Money Doctor, recommends EBS’s Family Savings account for parents with a short savings window. With this account, you earn 1.75pc interest if you can save between €100 and €1,000 a month for a year. This account has less strings than KBC’s Extra Regular Saver. However, after the first year, the interest rate paid on the Family Savings account falls to 0.25pc. ÷ BETWEEN FIVE AND TEN YEARS TO SAVE A good life assurance savings plan may be your best bet if you have five or more years to save for college bills. Both Lowe and Magee recommended Irish Life’s Pinnacle plan for parents with between five and 10 years to save. Pinnacle is a life assurance savings plan which allows you to invest in a number of stock market funds. Understand fund charges though. “The index funds are considerably cheaper on this plan than some of the actively-managed funds,” said Magee. Davis recommended Zurich’s Child Savings Plus plan for parents with five or more years to save. ÷ 15 YEARS TO SAVE Zurich Life’s Lifesave Special Savings Plus life assurance savings plan was recommended by McGee for those with 10 or more years to save for a child’s third-level education. ÷ BUYER BEWARE Before choosing any life assurance savings plan, understand the charges — and the investment risk you are taking on. Watch out for entry charges — also known as allocation rates as these determine how much of the money you pay into a fund is invested. Choose a fund which doesn’t have entry charges — or which offers as close to a 100pc net allocation rate as possible.