How to fund school and university fees Flexible pay as you go Aside from scholarships, bursaries and awards to reduce fees, many schools provide financial plans for parents to pay their fees in a more manageable way than termly lump sums. Increasingly, this role is being filled by third parties who can take the often complex administration off the school's hands. The independent bank Close Brothers offers a Close School Fees product, which charges parents 1.65 per cent a year to arrange for fees to be paid monthly rather than termly. They currently provide the service for more than 150 schools, and aim to increase this to 500 institutions by September this year. Schools already signed up include Bradfield, Sherborne, St Swithun's School Winchester and Downe House, Berkshire. SFIA (schoolfeesadvice.org; 0845 4583690) can be used for short or long-term solutions to paying school fees. Parents wishing to arrange their own flexible payments with a school should approach the bursar's office. Investing for the future Parents who have time on their side can build an investment portfolio designed to fund future school fees. Philippa Gee, who runs her own wealth management company, says there are more variables to consider when investing for a set financial target such as school fees, rather than for a less rigid goal such as a pension. "Ensure that whatever you put in place can cope with a change of school, or if the child gets a scholarship, or if the fees inflation of the school in question changes significantly - which is something we have seen a lot and can seriously impact on assumptions and returns," she said. Another factor we come across is the arrival of another child, which could change the dynamics of any financial plan. Charges of the relevant investment are another issue, as are the tax implications. We also look for the most transparent products and, where required, those that are simple and flexible. If it is university you are looking at, Hanson Wealth Management provides a savings guide on its website (hansonwealth.co.uk/school_fees) which details how much you will have to put away per month for university fees, depending on the number of years before the first payment would be due. The table is based on the premise that for a student enrolling this September, three years at university would cost £53,005 - which includes rent, food, clothes, entertainment and books as well as tuition fees - and assumes that the total cost of university will increase by 4 per cent each year. Assuming annual growth of 6 per cent - no mean feat in the current environment - Hanson estimates that new parents with an 18-year investment horizon would need to save £300 a month to raise the appropriate capital. Parents with 10 years to go need to tuck away nearly £500 a month, and those with just five years to save face monthly payments of £940. If you have five years... Darius McDermott of Chelsea Financial Services says that if you have a short-term horizon it is best to stick to cautious assets. He suggests a breakdown of 30 per cent in cash, 30 per cent in bonds and 40 per cent in equities. "If you need all your money out in five years" time, then you cannot afford to leave much to chance," added Ms Gee. However, if you plan to withdraw cash for only a term's payment at a time and leave the residual money for longer, you might be willing to look at building in more risk. Tread carefully. If you have 10 years... For a longer-term investment horizon, Chelsea Financial Services advocates a portfolio constructed of 20 per cent cash and bonds and 80 per cent equities. Ms Gee said: "With 10 years to invest, this is where a properly diversified portfolio is required, set up to meet your personal risk, cost and return assumptions. This could be as complex or as simple as necessary, but basics such as the Jupiter Merlin Income Portfolio, Invesco Perpetual Distribution or Investec Cautious Managed funds may all be good starting points. It would be worthwhile building a more complete solution to meet specific needs, however, so do speak to a financial adviser. If you have 18 years... Parents saving for higher education have the most flexibility. Although stock markets have been volatile recently, it still makes sense to use investment funds over the long term. "The longer you have before you need to access the pot of money, the more risk you can afford to take," said McDermott. As you get closer to the date when you need the money, you can move it into less risky investments so that should markets fall, you won't find you are short on the sums required. He recommends being 100 per cent invested in emerging market and smaller company equities for an 18-year investment horizon - such as Rathbone Global Opportunities fund. Make sure you take advantage of any tax-efficient investment measures to maximise returns. Using your child's Junior Isa allowance from birth gives you 18 years of tax-free income to accrue. The current annual limit is £3,600.