Saving towards the cost of university education can be very simple. One of the most tax-efficient ways to save long-term is to open an Individual Savings Account (Isa). These allow you to save or invest up to £7,000 each year without paying tax on the interest earned. Many financial advisers recommend Isas because they are flexible and allow you to invest as little or as much (up to the government-imposed limit) as you like each year and you can cash them when you like, without incurring any penalties.
Do remember that a stocks and shares Isa is based on the stock market so fluctuations in the market will reflect in your fund value. Do bear in mind that a stock market crash just before your child starts university could mean your fund falling to half its intended value. To avoid such a scenario, consider putting the money into a more stable savings vehicle as the time for university approaches.
If you are already putting the maximum annual investment into an Isa, high interest savings accounts with the major banks and building societies are an alternative. However, these are less tax efficient and will probably be paying a lower rate of interest than an Isa, but they are a safe and flexible option.
