What to invest in
Unit and Investment Trusts
Saving via a unit trust means pooling your money with others. A financial manager invests the pool of money in potentially lucrative ways and puts the shares into a fund. You then buy units in the fund. You can then buy and sell units. The value of the units goes up or down in line with the overall value of the fund.
Investment trusts invest in the shares of different companies, therefore spreading the financial risk. Investment trusts are themselves companies in which you buy shares. This means you're investing directly, whereas with unit trusts you're investing indirectly.
Bonds are effectively corporate IOU notes that pay interest. You buy a bond, whose value can rise or fall just like an ordinary share, and receive interest. This interest is either paid regularly, or in one lump sum at the end of the bonds life. The key features of a bond are; the Nominal, Principal or Face amount on which you receive interest, the Price it costs you to buy the bond and the Maturity Date, on which the issuer has to repay the Nominal Amount. The time between a bond being issued and it maturing is often referred to as the tenure or maturity term of a bond.
Stocks and Shares
Stocks and Shares are the same thing. The word Stocks is normally used when referring to the Shares of more than one company. Shares are literally a share or part ownership of a company that can be bought and sold. Companies often pay Dividends, which are distributed amongst shareholders. Shares can both rise and fall in value.
Funds are baskets of stocks, bonds and other investment products. Investing in a fund gives you the chance to indirectly hold a wide range of products without requiring you to make multiple smaller investments. They can be simple funds that track a stock market, or targeted at a specific region, industry type, etc.
Payment protection & Insurance
It is possible to take out an insurance policy that specifically ensures the payment of your children's school fees in the event of a change in your personal circumstances due to serious illness, injury, death or loss of earnings due to redundancy.
You can get policies that cover the rising cost of fees, not just what they cost now, and can pay out either lump sums or ongoing termly pay-outs. Many policies are written so that payments are made directly to the school and are not subject to inheritance tax.
These policies can be expensive, especially loss of earning due to redundancy, but we do suggest you at least look at the market and see what it would cost to get yourself covered. We've identified a selection of main providers in our Useful Links page for you to check out.
Finally, many schools offer their own insurance policies, so be sure to check their sites, or ask the school directly.