Paying for your child’s education can be tricky.
Education isn’t cheap especially if you are considering sending your children to private schools. Some routes are obviously going to be more expensive than others, but whichever one you choose you are going to need to fund it in some way.
Think about all the costs involved in education
The most important thing you can do is start looking at all the costs involved in your child’s education which may help you plan better for it. Public vs private schools aside there are a long list of items which need to be considered. Firstly fees will obviously vary tremendously going upwards of $20,000 or more for top private schools. This usually increases the older you child gets. Enrolment and administration fees may also be involved (most of which you will not get back if you choose not to send your child to that school). In some cases there are parents’ association levies, building funds, library funds and other fund raising events.
This may or may not be compulsory in your chosen school. Uniforms are probably one of the biggest costs second to school fees, especially if you have a fast growing child and these need to be constantly replaced. Textbooks, stationary, laptops, sporting gear and excursions are all extra costs. Extra-curricular activities such as music lesson will also add another ding to your wallet.
How do you pay for your child’s education?
The sooner you can start planning to fund your child’s education, the better. This is especially important if you do plan to incorporate private schooling for all or part of their education. If you had two kids who you are planning to send to a private school with an average of $20,000 school fee per year that’s a load of money you would have to be earning before tax. If you can start setting aside money from the birth of your child and putting it into a high interest saver or managed fund you should be one leg up by the time the child reaches high school.
Pay off your mortgage
Some people opt for paying off as much extra as they can from their mortgage (or their total mortgage) so that they have a considerable sum to be able to redraw.
Use an education plan fund
Australian Scholarships Group and Lifeplan are two examples of providers who have education plans where you contribute an amount every set period which is pooled with other members and invested. Do your research on these though as there have been some negative feedback especially during the GFC where the investments plummeted in value.
Invest in a managed fund or something with potential capital growth
Managed funds are more for longer term investment options-anything from 5-10 years onwards because the markets do rise and fall and you don’t want to be relying on the money at a bad time. Try and keep the investments in a more balanced portfolio if you are worried. There may be some tax breaks using a managed fund but talk to your financial adviser or accountant for the most suitable options.
Whilst rare, some employers may offer you the opportunity to pay for school fees from your pre-tax salary which could effectively save you some tax by lowering your taxable income.
Longer term options
Insurance bonds and endowment warrants are more for a longer term savings strategy with 10 plus years. Talk to your financial adviser about these two options.
Whichever route you choose to fund your children’s education is it better to try and not take out any loans and go into debt. Try and plan early to avoid having to do this.
Other options to save you money
Whilst you have to pay for all these things out of your own pockets there are ways you can reduce the amount. Schools often have some type of fee discounts by paying by a certain date, for a year in advance, or even the entire cost of the schooling (these may be a good option if you can to avoid subsequent fee increases every year). You may also find that there are discounts by the number of children that are attending the same school.
Scholarships are another way you can avoid a full blown hit of fees, although these can sometimes be hard to attain. If you are good with your credit card, and the school offers the option to pay by this you can take advantage of interest free periods as well as loyalty points. Also look at second hand uniforms and textbooks-no one will notice the difference. If you are struggling to meet payments some schools may offer an instalment plan which will help you budget your money but keep in mind there may be extra costs involved in this.
Whatever route you take does not really matter just make sure that you start planning early for it. Being prepared will make it much easier to cope with these extra costs later on.