Children's Education

SAVING FOR EDUCATION - GENERAL INFORMATION

Children's education is very important to Service families. From pre-school learning through to sixth form, you want to make sure your children have the best educational resources available to meet their unique needs and develop their individual talents. If you are like most parents, sending your child to university is high on your list of financial priorities.

Next to buying a home, children's education will probably be the greatest expense you'll face during your lifetime. From private schools to top universities, educational costs continue to increase. However, if you plan ahead you can manage the costs. It's never too early to establish an education savings program. Additionally, you should evaluate how you can protect your children's educational opportunities should anything happen to you.

Various financial companies offer innovative products, quality services and qualified financial professionals - a strong combination that you can trust to help you meet your commitments and dreams in a changing world. It is very difficult to predict what unexpected events the future may hold. Financial advisors can help you prepare to meet most of the challenges life throws your way and provide a lasting relationship to help you meet your financial goals. For further information and a list of professional financial advisors, click here

Saving up to pay education costs.

What are unit trusts? A unit trust is an investment fund shared by lots of different investors. It is an 'open-ended fund' which means the fund gets bigger as more people invest and gets smaller as people withdraw their money. A fund manager who makes the investment decisions runs the fund.

The fund is divided into segments called 'units'. Investors take a stake in the fund by buying these units. The price of a unit is based on the value of the investments the trust has invested in.

Charges. You usually pay an initial charge when you buy (this charge leads to a difference - called the 'spread' - between the prices at which you can buy and sell units). The initial charge is usually reduced or even eliminated if you buy through a discount broker or Internet fund supermarket.

Some unit trusts have no initial charge - sometimes there is an 'exit charge' instead when you withdraw your money.

With all unit trusts, the company running it takes a yearly management fee direct from the investment fund.

You need to check out all the charges before you decide which one to buy - charges can have a major impact on the performance of a unit trust. You can buy unit trusts direct from the unit trust management company or through an independent financial adviser, stockbroker or private client investment manager. You can either invest a lump sum or save on a regular monthly basis.

What are open-ended investment companies (OEICs)? An OEIC is a company whose business is managing an investment fund. You take a stake in the fund by buying the shares of the OEIC. It is an 'open-ended fund' which means that the fund gets bigger and more shares are created as more people invest. The fund shrinks and shares are cancelled as people withdraw their money.

The price of the shares is based on the value of the investments the company has invested in.

You usually pay an initial charge when you buy and sell OEIC shares, but otherwise there is no difference between the buying and selling price of shares. Because of this OEICs are referred to as being 'single priced'. Some OEICs have no initial charge - sometimes there is an 'exit charge' instead when you withdraw your money. The company takes a yearly management fee direct from the investment fund.

You can buy OEICs direct from the company or through an independent financial adviser, stockbroker or private client investment manager. You can either invest a lump sum or save on a regular monthly basis.

What are gilts? Gilts, or gilt-edged stock, are issued by the government to help fund it's spending. Gilts are also known as government bonds. The government sells gilts to raise money. People who invest in gilts then receive fixed-interest percentage payments twice a year - interest paid at a set rate. Most gilts have a face value of £100 at which the government promises to buy the gilt back on a specific date in the future.

Are they risky? Gilts are generally considered to be safe investments because they are issued and backed by the government. If you buy a gilt and hold it until it is repaid by the government (called 'redemption'), the return you get will be fixed from the outset. Used in this way, gilts can be low risk investments. However, gilts are also traded on the stock market where their price can go up or down depending on what people think is going to happen with interest rates - when interest rates are expected to fall, the price of gilts rises, and when interest rates are expected to rise their price falls. If you intend to sell on the stock market rather than holding to redemption, this is a more risky way to use gilts.

How do you buy and sell gilts? You can buy them through a firm offering stockbroking services - you will pay commission charges for this service similar to buying other investments in this way. However, it is also possible for individual investors to buy gilts by post through the Bank of England Brokerage Service - you will pay commission charges but they will usually be lower than buying through a stockbroker. You can sell gilts through the same routes that you buy them. A free booklet, 'Investing in Gilts - the private Investor's guide to British Government Stocks', gives details on how to buy and sell gilts. It is available from the Debt Management Office on 020 7862 6525 or their website at www.dmo.gov.uk

Tips on paying for education