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TEP - a good alternative for Children Education Plan Print E-mail

If you didn't start saving for further education as soon as your child was born, don't worry.

An alternative is to invest in traded endowment policies (TEPs).

"Because you can [roughly] calculate what it will cost to send your child to university, you can buy policies for the right amount," says Brain Goldstein, managing director at market maker Policy Portfolio.

All parents want the best for their children, and financial security is a big concern for them. The day-to-day cost of raising a family is high enough - an average of pounds 82,000 a child from birth to age 18, according to the Family Assurance Friendly Society - without putting aside a nest egg for their future. But with university fees rising, and soaring house prices making it harder for young people to get on the property ladder, parents are having to think earlier than ever before about helping their children out financially. The good news, though, is that if you start soon enough you can build up a sizeable amount with only a modest monthly outlay.

Patrick Connolly, associate director at IFA Chartwell Investment Management, points out that you need to look beyond the packages - at the funds they actually invest in. With this in mind, he doesn't favour the Rupert Bear or Thomas the Tank Engine schemes.

"If you're investing for a child, you need to go for a core holding that offers diversification," says Mr Connolly.

The investment trusts he recommends to parents are the Witan Jump fund and Foreign & Colonial's investment trust. For those who prefer a unit trust, he likes HSBC Growth and Income. Ms Foster's preferred unit trusts for investing for children are the Fidelity Wealthbuilder and Invesco Perpetual High Income.

Adventurous investors may be tempted by a higher-risk fund, but Philippa Gee, investment strategist at IFA Torquil Clark, warns against this, especially if you are investing to fund further education. "I wouldn't go for an aggressive fund such as a technology, Japanese or Pacific fund because you're taking a much higher risk with money that you can't afford to lose."

If you didn't start saving for further education as soon as your child was born, don't worry. Mr Connolly recommends you work out roughly how much you'll need, how much you can afford to save and how long you've got to save it.

If you've got another 10 years or so before you need the money, equities are still likely to be the best option. An alternative is to invest in traded endowment policies (TEPs).

"Because you can [roughly] calculate what it will cost to send your child to university, you can buy policies for the right amount," says Brain Goldstein, managing director at market maker Policy Portfolio.

If there's less than five years to go before your child heads off to university, Ms Foster advises you to concentrate on cash-based products. A tax-efficient mini cash individual savings account (ISA) allows you to invest a maximum of pounds 3,000 a year. And don't forget that if your child is 16 or over, they are entitled to their own cash ISA allowance.

 
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