Saving for school fees

Start early and stay flexible are the rules for school fees savings plans. Any savings plan that builds a capital sum can be used as a school fees savings plan.

Some of the plans which are marketed as 'school fees' savings plans are often no more than a series of rather expensive endowments. An endowment has to run for at least 10 years to get value for money, so if you don’t have at least 10 years before the start of school, don’t even consider an endowment-based plan.

Educational Trusts and Composition Fees, which are paid in advance to the school of your choice, have some tax advantages, but only if your child eventually goes to the school you have planned. The rules regarding these types of trusts are complicated and inflexible.

The best option is saving regularly into an Individual Savings Account (ISA) (offered by banks, building societies, etc). This has some tax concessions and has no fixed term. If your child does not go to an independent school, the money is yours to spend as you please. This is also the best type of plan for university fees.

Take independent advice about the best ISA to use. Different funds are designed for different purposes. Some are more suited to 5 year investments, others for longer. If you are serious about saving for school fees you will have to make reasonable contributions, so it is important to get the best from your savings. If you have less than 3 years before you will need the money, simply use a deposit account and call it a school fees account.