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Child Education Plans

 

It’s true, your children may well prefer a Gameboy or an X-Box and regard a Child Education Plan as a rather boring present, but in reality it could be one of the most important gifts you ever give them. Children need toys for Christmas, agreed, but if you want to do that little bit more, why not invest in an education plan that will ensure your child gets the very best education possible.

We all want the best for our children but are not always in a position to give it to them. When the time comes to send your child to a private school or to university, you may not have the means to pay for years of expensive tuition and/or boarding. In spite of their best efforts to build up a special fund for this purpose, most parents simply don’t get around to saving much and find themselves in a difficult situation when confronted with the bill for private or tertiary schooling. If your income has grown apace in the intervening years, this won’t represent a problem, but a large proportion of parents have to resort to taking out high interest loans or re-mortgaging their homes, potentially putting their own financial security and old age at risk.

It is much easier to plan ahead at an earliest stage as possible, and prepare for the expense of private schools, universities or colleges by paying a fixed monthly sum into a Child Education Plan. The principle behind the plan is that it enables you to build up the funds required by making a relatively small regular contribution over a long period of time. How? By combining a low-cost approach to long-term investment with above-average returns. The plans can be tailored to your needs, and timed to mature either when your child starts school, college or university. Another interesting facet of Child Education Plans is that, although they were conceived as a saving fund to meet education costs, you are free to spend the money as you wish once the plan has matured. This means that if, for any reason, your situation has changed or your child does not want to attend university, there will be a lump sum available to use on anything else, including setting your son or daughter up in a business of their own or paying for an expensive wedding.

Traditionally, parents have been more inclined to make some form of preparation for university costs, while regarding schooling as part of regular household costs, but the latter, particularly in areas where private schooling is preponderant, has become far more expensive than most people realise. The real need to plan ahead and provide for schooling is far greater than is commonly perceived, but more and more young parents are realising that they can reduce the financial burden by starting to save at an early stage. School fees ranging anywhere between 3000€ and 7000€ per annum and a staggering 20,000€ or more a year for university costs bring the matter home. If you have more than one child you can simply multiply the figure several times, yet small monthly payments of €150 can ensure you will have the funds available when the time comes rather than being faced with huge financial demands at a time when you should be putting money aside for your own future.

The level of contribution, just as whether you choose to pay on a monthly, quarterly or annual basis, is determined by yourself, but it is important to keep it up, for if you take out a Child Education Plan when your first child is born, there will be sufficient funds available for further education needs by the time he or she is ten years old. By adjusting the contribution upwards as your income grows or adding the occasional windfall to the fund, you will find your buying power further enhanced when the plan matures. A professional financial consultant will be able to advise you on the monthly sum required, depending on the level of education you wish to provide for and an estimation of your current and future income. In cases where young parents do not yet have the money to spare for the monthly contributions, a Child Education Plan is an ideal gift from a child’s grand-parents, or god-parents, who can make such a gift tax-free and declare it as a legal tax-free advance on an inheritance. Once the plan matures, there is the option of withdrawing the entire sum or simply taking the amount needed to cover annual education costs. The latter has the advantage that the fund continues to earn high rates of interest.

As Janet says, “If you have to pay for your children’s education anyway, why not make life a lot easier and spread the cost by preparing for it in advance?”

 

 

Janet Knight (M.L.I.A..dip, FAIQ II) is an independent financial advisor with Offshore Investment brokers, accredited by the Chartered Insurance Institute (C11).

For more information on Inheritance Tax Planning and other financial advice, tel. Janet Knight on 639 067 704 or 952 798 002
or email her on janetknight@oibinternational.com