FAQs on school fee planning
Chartered financial planner Gareth Rose looks at how to manage the costs of education more effectively
We would all like the best for our children, and that will often include the cost of private education. Whilst parents are generally aware that school and university fees can represent the single greatest cost of being a parent, they may not know the likely costs or thought about how they are going to fund it. How then can you ensure that you have the necessary funds to support your children during their education, potentially all the way from primary school through to university? This article addresses the three main questions when it comes to planning the costs of private education.
How much should I budget for school fees?
Sounds relatively simple, but to be able to plan for private education fees you need to know what you’re likely to be paying. Fees can of course vary greatly, however as a guideline the average fee in 2012 stands at £13,800 per year. The average price for a boarding school is now just over £26,000 per year. Fees are also rising at a fast rate, up by 4.5% this year. Over the course of the last decade fees have risen by an average of 75%, far outstripping rises in earnings.
You also need to know what the fees cover, are there likely to be additional costs and, if so, how much might these be? Also you need to give thought as to how long the fees will be payable for. Is the intention to fund all the way through to University?
Finally, but potentially most important, how many children will you have?
Am I eligible for financial assistance?
Despite the rising costs, recent figures show a third of pupils gained some form of assistance with fees in 2012, with a record £284.7m spent on means tested bursaries, up by 9.4% in a year. Additional grants and awards can also be available through charitable trusts. The availability and amounts of these depends on the school chosen and the qualifying criteria.
Do I have to pay the full year’s fees up front?
There are a number of ways of managing the costs of private education. These include:
- Paying school admission costs and fees from taxed income
- Investing a lump sum to provide for education in the future
- Using existing assets
- Setting up some form of regular savings plan.
The available options of course depend on your own personal circumstances; where you can plan ahead it may be possible to put in place a savings plan to help provide funds to meet the fees. There may be lump sums available from inheritances or gifts from parents or grandparents. Where either regular or lump sum savings are available it is imperative to ensure the funds are held as tax efficiently as possible and invested appropriately.
It is highly likely that, for most people, the majority of fees will need to come from net income. In this instance you need to have in place an accurate budget to ensure that the fees remain affordable and do not impact upon your standard of living. Also careful consideration needs to be given to either one or perhaps both parents being unable to work due to either death of ill health and what impact the loss of income will have on the family and the ability to pay the ongoing fees.
Gareth Rose is a chartered financial planner at Moore and Smalley Healthcare Services and a member of AISMA.