Long term investment for college fund

R

random10

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Apologies if this post seems really silly but I don't have any experience in investments at all. We had a meeting recently with the investment manager of our local BOI. We were looking for advice on what to do with the children's allowance in order to have a college fund. We are in the fortunate position where we can save the allowance. He told us about target saver where you invest 200 per month, you cannot make withdrawals for 5 years without being penalised. This doesn't bother us, our baby isn't one yet so we won't need the funds for 18 years. He suggested investing in a range of funds at "medium risk" and explained that really if you're leaving money for over 10 years it should be ok. Other options seem to be state savings bonds. Would wiser people here have any advice, what are/would you do with children's allowance?
 
Getting a return on money at the moment is hard. Almost impossible without taking on more risk than usual. Savings accounts are generally around 1% for lump sum, 3% for regular savers. If you have zero attitude to risk, you could open a KBC regular saver for the childrens allowance. This currently gives 4% interest (going down to 3.5% soon), with ability to deposit an initial lump sum.
State savings bonds are generally used when you already have a lump sum, rather than buying month to month. These are DIRT free, so if you had a large lump sum, these would be a good option with zero risk (unless you think Ireland Inc is going to go under).
Taking investment advice from a bank IMO is not a good idea. They can only push their own products, meaning you have far less choice. Also, these products are considered quite opaque in that the fees are not readily available (I notice you didnt mention fees at all in your original post). Seemingly small numbers (like 1.5%) can sound small, but will destroy gains in the future. Remember, your investment will go up and down, but fees will ALWAYS be charged. Managed funds also have historically underperformed.
While you mention you dont need the money, its not good that you are penalised to access your own money in an emergency. This is also a negative for me.
My personal opinion is I would not invest with these BOI funds.
 
Thanks for your reply. Yes fees at 1.5% which is why he said there would be no point in putting money in a low risk fund. It'd have to be medium risk. I've looked quickly at KBC but it seemed to me to get a decent interest rate you have to open a current account which I've no interest in. Your post has given me food for thought
 
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