Fee increases greater than inflation.
There is no doubt that school fees have been annually rising by several percentage points more than inflation in most of the developed world. Total education fees for a child from age 11 to degree graduation could easily be five hundred thousand dollars (or equivalent) and rising. This is a long term trend and is unlikely to change, as more parents demand top-class education for their children. However, not everybody who wants private education for their children is a multi-millionaire. Many parents are finding paying fees more and more of a struggle. So what can people do to help themselves? They are actually a wide variety of ways to reduce total fees, depending on the country and school involved.
These are probably the best-known way of providing financial support. They are usually offered to outstanding children who excel academically or in sport, dance, music or art. Each school has different award criteria, but success almost always involves a test, exam or audition before an award can be made. Values can be a very small contribution and are more often for prestige than financial assistance.
These are provided by the schools, are usually means-tested and might also be tied to winning a scholarship. Each school has its own rules but be prepared to start your application early. There are usually very detailed forms to be completed, with lots of financial questions regarding your income and assets. Some may find the questions intrusive and, needless to say, those with moderately high income need not apply! However, a successful application can provide a large contribution to fees.
There are a number of charitable trusts that provide grants but again, like the bursaries, they are strictly controlled and are usually only offered in cases of hardship.
Discounts (siblings and certain professions)
Some senior/high schools do offer discounts for more than one child, these vary but are typically only 5-10% for each child. Several also provide discounts for the children of certain professionals, such as the military or teaching.
As charitable high schools in the UK are exempt from paying tax, they are able to earn interest gross and some offer discounts for several years of advance payments. However, given the current low-interest-rate environment, these schemes are unlikely to be attractive. They also tie up considerable capital that could be better invested elsewhere.
Expats will know that many companies will help their managers sent on overseas contracts with school fees. This can be a great help, but such contracts are often only for 2-3 years, parents need to think carefully about how their children will be educated once they return to their home country.
Help from grandparents or other relatives
It’s wonderful if grandparents can contribute towards fees but, depending on the country, there may be tax implications.
Saving and investing
However, all of the above rely on somebody else to help you out. It’s obviously far better if you can plan to pay these fees yourself, without relying on others. Of course, you can still reduce fees using one of the above methods, and then use your own money for something else! Start Early. Preparing to pay education fees is much like any other investment, and many of the same principles apply. The first, vitally important point, is to start early. This obviously allows more time to save with more compound capital growth taking place, both of which will be a big help in reaching your targets.
Keep an “Education Account”.
It’s a good idea to keep invested money in a completely separate account, to reduce the temptation to use it for other expenses.
Don’t forget that the fact we mentioned right at the beginning, fees are rising at a greater rate than inflation. Plan your saving and investment targets to account for such increases.
Starting early is always good advice but WHERE do you start! Tax-efficient, successful investing requires professional knowledge and objective thinking, which few individual investors are able to apply. Even fewer people have the required time to do the necessary, detailed research. When your children’s education is at stake don’t take any chances, get in touch with us and we can provide you with free, impartial advice.