Craig Jamieson: Investments are a good way to fund your child’s higher education

Thousands of students will currently be preparing to head off to university in the coming weeks, but, as many parents will know, the milestone does not come cheap.

Students face many expenses including accommodation, course materials and socialising, while those wanting to study outside Scotland could also face a bill of £9,250 a year for tuition costs alone.

How you save for your child’s higher education costs will depend on how long you have got before your child finishes school and the money is needed.

If your child is due to start university in the next few years, sticking with cash savings is likely to be the best bet to ensure that the money is readily available and is not exposed to any investment risks.

If you have longer to save - at least five years but preferably nearer to 10 or more - and you are comfortable accepting the risk that you could lose money in return for potentially higher returns than cash savings can offer, then you might want to consider investing.

Short-term fluctuations and market swings should hopefully have time to iron themselves out during that sort of timeframe, but you will need to bear in mind that however long you hold investments for there is a chance you might still get back less than you invested in the first place.

It is also important to remember that you should try to invest across lots of different asset classes and sectors, so that if one disappoints the other investments will hopefully make up for it.

Investment funds can offer a simple way to do that by pooling your money together with that of multiple other investors and putting it into a wide spread of investments to help reduce the overall risk to everyone.

There is a huge range of funds to choose from in the marketplace.

If you want a simple solution to creating a diversified investment, you may want to consider ready-made investments, which many investment providers will offer.

This option would take away the work of having to make investment decisions, as your money is placed across a range of assets on your behalf.

There are various methods to take control of the money you invest for your child with trusts, for example, ringfencing assets so that children can receive the money at a later date.

These are able to hold various assets, such as shares or funds, and parents - or other trustees - can be appointed to manage the trust and decide how and when it would be appropriate for the money to be distributed.

If you decide to use either a Junior Individual Savings Account (Isa) account or Child Trust Fund account to save for your child’s higher education costs.

Going down that route would means your child would gain control of the full pot of money at the age of 18.

In the current tax year, which runs to April 2020, parents can invest up to £4,368 on behalf of each child into a cash or a stocks and shares Junior Isa or Child Trust Fund, with both benefiting from gains and income being paid tax free.

These accounts must be opened by either a parent or a legal guardian, although once they are open anyone can pay money into them.

Your child can have one or both types of Junior Isa or one or both types of Child Trust Fund.

However, they are not permitted to have both a Junior Isa as well as Child Trust Fund. It is possible to transfer money saved into a Child Trust Fund into a Junior Isa.

You could also hold an Isa or investment account in your own name, with the aim that the money is invested for your child’s future. You can invest up to £20,000 in Isas in the current tax year.

Anyone going down this route should bear in mind that tax rules can change and the value of any favourable tax treatment to you will depend on individual circumstances.

Craig Jamieson is regional director for Scotland and Northern Ireland at Barclays Wealth Management.