Jean Shepherd, 53, and her husband Garry, 55, of Shrewsbury, are among the many parents now gearing up for an expensive few years — their only child, Kathryn, is off to university.

Jean says: “She is receiving the standard loan for her tuition fees and a maintenance grant of £6,000. We plan to finance her other living expenses but would like some advice on funding the next four years.”

The couple have agreed to pay Kathryn an allowance of £250 a month and she has a weekend job as a receptionist that she hopes to continue after she starts university. She also has seven National Savings & Investments Children’s Bonus Bonds worth about £6,600, due to mature when she is 21 and originally bought to help her on to the property ladder.

“But I suspect that she will want to use some of the money to pay off her loan when she graduates,” Jean says. “Should these be redeemed and invested elsewhere?”

Jean works for Shropshire County Council and earns a little less than £50,000 a year. Garry, who works for Openreach, is a standard-rate taxpayer and earns about £30,000 a year before tax. The couple have been mortgage-free for four years, and have no other debts.

Jean says that the couple have received “dubious” financial advice in the past and had a 15-year with-profits policy that matured earlier this year for a “disappointing” final sum. The money is now in a one-year fixed-term bond with the Post Office. The couple have another 18-month bond with the AA, so have a total of £18,000 invested. They also have a number of BT shares, plus a few shares with Alliance & Leicester (A&L), Bradford & Bingley and Halifax attached to accounts. Jean describes these as “nearly worthless”, but is “happy to sit on them in the hope that they will pick up at some point in the future”.

Garry transferred last year’s Isa contributions to a Principality Building Society cash Isa and Jean has a Barclays Golden Isa, with last year’s contributions in an A&L account. Jean also has an old Royal London equity Isa investing in Europe.

The couple pay the maximum £250 into two monthly saver accounts with Lloyds TSB (paying 5 per cent and 6 per cent) with the intention of investing a lump sum at the end of the one-year period. Jean also saves £200 a month in a Sainsbury’s internet account paying 2.6 per cent, which the family dips into for holidays and other big expenses.

Jean would like an expert opinion on whether the Royal London account is worth maintaining and if, overall, the family are making the best use of their savings potential.

On top of their investments, Jean and Garry own about ten acres of agricultural land in the village where Jean lived with her parents, about 20 miles from their home. A local woman who rented the land for £400 a year is giving it up at the end of next month.

Jean says: “Garry and I would love to build our own property and had hoped that this land would be the answer.” However, the council has told the couple that, to receive planning permission, the land must be used for affordable housing.

She adds: “I also have no idea of the land’s true value or its rental value. If we cannot build our own property on it, I cannot see a reason for keeping it. Any ideas what we should do?”

There is a further question mark over their current property, a 1960s three-bedroom detached bungalow. Jean and Garry have planning permission to put a pitched roof on the existing dormer and create an en suite bathroom. Jean feels that these changes would boost the value of the property and make Kathryn’s bedroom larger and more attractive. “However, is this sensible if she is leaving home?”

What the experts say

Financial Planning: Rob Borrill, Pearson Jones

“Jean is incurring unnecessary tax because she holds income-bearing investment accounts in her name. Any investment producing taxable income should be in Garry’s name only.

“The Post Office and AA savings are tied up, but should be transferred to Garry as soon as they mature.

“Isa allowances will increase from October, which means that Jean and Garry could raise their holdings to £5,100 each, funded by their non-Isa savings. The Royal London Isa seems out of character. It is good that Jean is saving in an equity-based fund, as she would have bought units at a relative discount in the past year. However, this seems very specific, considering that it appears to be her first venture into equity-linked funds. I would need to assess her risk profile to comment on the alternatives.

“The shares in Alliance & Leicester, Bradford & Bingley and Halifax have all changed because the first has been taken over by Santander and the latter two by Lloyds TSB.

“According to Peter Oppenheimer, an analyst at Goldman Sachs, bank shares will rise by 76 per cent next year. If this is to be believed, the couple should hold on to their shares.

“The competitive terms of the student loan means that Kathryn should take the maximum and invest whatever she doesn’t need. As a non-taxpayer it is highly likely that she will make a profit.

“The family should keep the children’s bonds until Kathryn is 21 because an attractive bonus is added and the return is tax free. They cannot make any further investment, as it is only three years until Kathryn is 21.”

Action plan

Transfer all Isas into Garry’s name.

Invest student loan.

Keep the children’s bonds.

Financial Planning: Jerry McLoughlin, Punter Southall

“To improve the tax efficiency of their finances, Jean and Garry could consider wrapping their small share holdings into an Isa. They would need to ensure that no capital gains are realised when they sell the shares; if they wanted to keep these particular shares they would need to buy them back in the Isa.

“From an administrative perspective, a fund supermarket such as Fidelity’s FundsNetwork would allow them to hold all their Isas under one account and to make easy fund switches and valuations.

“Jean should also re-register her Royal London Isa on to FundsNetwork and then consider switching it to a fund with a better record and greater diversity.

“Jean and Garry will have more than £30,000 of savings available after one year. These could be used to assist with the costs of university, but they should keep some of their money (about £10,000) for any financial emergencies in the next four years. The short period makes shares and bonds unsuitable; instead they should keep the money in cash accounts so that it is easily accessible. ING offers an instant-access savings account with an annual equivalent rate (AER) of 3.2 per cent; for a longer term, Abbey offers a two-year fixed-rate bond at 4.2 per cent AER.

“If there are still savings available when Kathryn finishes university, the couple could consider investing the lump sum for longer-term growth.”

Action plan

Wrap shareholdings into an Isa.

Re-register Royal London investment.

Keep leftover savings in an easy-access account until Kathryn graduates.

Property: Mark Ashbridge, Savills Private Finance

“Jean and Garry’s tenant was paying £40 an acre, but it may be possible to charge more — horse grazing could fetch at least £200 an acre. The capital value of the land could be anything from £3,000 to £10,000 an acre. People will often pay a lot for small blocks of land on their doorstep so that they can keep horses or increase the size of their garden. Jean should speak to a local land agent to advise her on the value.

“If planning permission proves impossible, the Shepherds may want to sell the land and reinvest the money elsewhere for a higher return; if the land is worth £5,000 an acre and it is yielding an annual rent of £400, they are making only 0.8 per cent. While the land will increase in value in the long term, it may be more appropriate to cash it in and reinvest in something with a higher yield to support the university finances.

“If the extra bathroom in their bungalow is to ‘add value’, then they need to be sure that their expenditure is sufficiently less than the gain in value on the property to provide a return. In any event, this will tie up capital on which there will be no cash return until the property is sold.”

Action plan

Visit local land agent.

Consider selling the land and investing the capital.

Think twice before making alterations to the bungalow.

Jean's response: ‘I now feel armed to seek further advice’

It was reassuring to see consistent themes from the experts; these will give us something to act on immediately, starting with getting our accounts changed into Garry’s name.

I will also seek further advice on how to maximise Isa allowances. Poor experiences in the past made me reluctant to contact a local financial adviser. But I feel better able to do this now, armed with the advice that you have given us.

Mr Borrill suggests that Kathryn take out the maximum loan, which she has done. Investing it is something we had thought about already, so his advice is reassuring.

I had no idea of our land’s potential value. Ideally, I would like to keep it, mainly for sentimental reasons, if I can get a trouble-free tenant.

Mr Ashbridge’s comments about the extension are useful, too. Kathryn is going to a local university within commuting distance, but she is in halls for the first year. We have decided not to do anything until next spring when, hopefully, we will have a clearer idea about our needs.