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Raising a family can be expensive. When your child grows, so do the associated costs. But by setting up a savings account, you can invest in your little one's future, writes Ciaran Brennan
Irish Independent, Tuesday November 06 2007
Children aren't cheap -- and that's official. Recent research by Hibernian Life found that the cost of education had risen by 28pc since it conducted its 2006 survey.
The cost in 2007 of supporting a child through primary, secondary and third-level education was estimated at €35,809, compared with €27,986 last year.
On average, the non-fee cost, which parents will face for their children's education in 2007/2008, is €1,037 for primary school and €1,416 for a child in secondary school.
For those parents whose children continue education at third level, the non-fee cost is estimated to average €5,109 per student per annum, including costs of rented accommodation.
Parents estimated these costs based on the common items they need to purchase for their school-going children, such as school uniforms, shoes, books and after-school activities.
And the news isn't going to get any better any time soon. Hibernian estimates the cost of a third-level education in the year 2020 at almost €35,000.
"Saving as little as €150 per month over a 13-year period could ensure this cost is covered," says Gareth McQuillan, director of product development and marketing with Hibernian.
"With the school year now well under way, marking the beginning of a 13-year spending spree for parents, or up to 17 years for parents of children who go on to third-level education, this is the perfect time to begin to save to meet those costs later on."
According to Hibernian, investing €150 in its Spectrum Saver Plus, indexing at 5pc per annum, could provide €35,000 in 2020.
Halifax provides even starker figures on the cost of third-level education, estimating that it will cost €43,561 in 2017 based on an annual inflation rate of 3.8pc.
Research by Halifax found that exactly half of all parents surveyed saved some of their child benefit, with two out of five of those saving all of it.
But Hibernian's research found that only 20pc of those surveyed are saving for their children's education.
Halifax has become the latest financial services firm to offer a savings product for children with its Child Saver Account. Essentially, it is two savings accounts -- child saver has an interest rate of 7.25pc AER (annual equivalent rate).
At the end of each year, the funds saved in that year are then swept into a separate demand account, called the Acorn Account, earning 3pc AER which provides the flexibility to withdraw funds at any time.
"It allows parents to put in as little as €10 a month and goes up to €200 a month," explains Niamh Lambe, head of products at Halifax. The earlier you start the better, and putting something away like the child allowance is great because if you don't have it, you don't miss it and it's busy building up."
Using the Child Saver Account, a parent could save up to €10,388.42 over a five-year period, and €22,084.74 over 10 years for each child if they put aside all of their child benefit based on one child at €160 per month, according to Halifax.
QUINN-life offers an equity child savings product -- QUINN-life Pride 'n' Joy Freeway which provides access to QUINN-life's suite of low-cost equity and bond funds, while at the same time allowing instant access to the fund at any time and switches between funds at your request.
It has no entry charges, lock-in, exit charges or commission to brokers, which can heavily impact on the overall amount payable from a savings fund, according to the company.
"QUINN-life understands the need to prepare for a child's future education or to contribute to a first home. Pride 'n' Joy Freeway enables customers to build-up a substantial fund by investing in a low-cost investment product that can deliver attractive returns," said Siobhan Gannon, general manager, QUINN-life.
"I can't think of a better way for a parent or grandparent to encourage a child's interest in saving and finance than to open an account for as little as €51 per month and allow the child to monitor the performance of the savings plan online."
QUINN-life estimates that saving the maximum child benefit allowance of €160 a month could yield a projected net amount payable of €64,314 after 18 years, based on an investment growth at a rate 6pc per annum and indexation at 3pc.
Last year, Eagle Star launched its Child's Savings Plus plan which invests in a selection of the Matrix range of funds managed by company.
The minimum monthly premium into Eagle Star's savings plan is €50 and lump sum amounts can be added at any time.
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