Saving for a brainy day

From birth to 10 years



A friendly society account. The first £25 a month saved is tax-free and the account can be held in either a parent's or child's name, or you could have three accounts, one in each name, to maximise the tax benefits.

Isas. Each parent can put up to £7,000 a year into a maxi Isa. A stock market-based investment will usually outperform a mini cash Isa or deposit account if you are saving for 10 years or more. Always go for a middle of the road fund - and transfer into a lower risk bond fund when your youngster reaches the sixth form (or equivalent).

Bare trusts. A unit trust designated for the benefit of a child. Your child will be able to take control of the money on turning 18. These are easy to set up and can be used to invest in shares or building society accounts.

Traded endowment policies (Teps). These are with-profits endowment policies that have been sold by the holder before the end of the agreed term. Buy one that matures as your child starts an academic year. But cuts in bonus rates mean these are now less surefire than before.

Zero dividend preference shares A share linked to split capital investment trusts. They mature on a set date, so you can time the fixed return to coincide with your child starting university.

However, many zeroes have suffered badly from poor stock market performance.

Five years ahead



Mini cash Isas. Seen as the best option if you are saving for five years or less. They offer competitive interest rates and interest is tax-free.

The last minute



Remortgaging Switching to a flexible mortgage with a draw-down facility means you can borrow more while your child is studying then make overpayments to cover the difference later.

Using equity in your home Alan White at Barclays suggests using an all-in-one account such as the Barclays Open Plan Offset deal (other providers include Virgin One and Intelligent Finance), which pools your current account, savings and mortgage.

You can borrow up to 90% of the value using an equity reserve account, which you can dip into as many times as you need. You repay at the standard variable rate on your mortgage, over whichever period you choose.

For further information: Association of Friendly Societies, tel: 020-7397-9560; Tunbridge Wells Equitable, www.twefs.co.uk or tel: 0500-800-830. For a list of independent financial advisers, www.unbiased.co.uk or call 0800-085-3250.

What your child will need



Estimates of the cost of a child at university



London - Elsewhere


In 18 years: £47,052 - £38,678


In 10 years:£34,270- £28,170


In 5 years: £28,110- £23,107


This year: £23,058- £18,954



What you need to save each month



For 18 years: £40.29- £33.12


For 10 years: £120.42 - £98.99


For 5 years: £312.64- £256.99


Source: Barclays Bank

Cost calculated by taking the National Union of Students' estimates of living and tuition fees .