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Fidelity gives lesson in saving

School leavers could face a shortfall of around 10,900 on university costs because parents save to meet higher education costs with cash rather than through shares, according to research from Fidelity International.

The firm says a typical investment of 50 a month in the stockmarket over the past 18 years would have created a savings fund of 24,700 compared with 13,800 if the same contributions had been put in a building society account.

It estimates that the cost of a university education is around 26,430.

Fidelity’s research shows that 58 per cent of parents saving for a child aged 16 to 18 are putting their money into a bank or building sav- ings account, with 25 per cent opting for shares, 7 per cent opting for bonds and 3 per cent choosing property.

Managing director Richard Wastcoat says cash is an impor- tant component of any balanced savings portfolio but history shows that shares deliver higher returns over the long term.

He believes that parents should be looking at lifestyle investments which are des-igned to meet the long-term savings needs of families by moving funds to less risky investments as the maturity date approaches. He says: “Many parents now realise that they have to set aside money for their children’s university education but many are falling into the trap of assuming that a building society account will del- iver sufficient returns to meet the bills.

“However, as our research shows, many school leavers could face a substantial shortfall if their parents follow this route.”

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