How do I afford Private School Fees when my time and finances are already stretched and my child starts high school in two years time?
For many, private school fees are a bigger issue than retirement. However, it is unlikely that you will see an avalanche of sympathy from main stream Australia for the financial struggle taking place behind closed doors as families come to terms with how they afford a private education. The cost of education has been rising at more than twice the rate of inflation over the past decade. However, with some forward planning you can give your child your choice of education.
Your life is full throttle. The great challenge for families is balancing lifestyle, children and career. However, as a parent, you only get one opportunity to educate your child. If you have more than one child and your eldest child has already commenced into private schooling chances are you are pushing yourself to find a similarly suitable private education for your second, third or more children.
It is most likely the choice of private school education is the accepted norm amongst your friends and professional colleagues and a hot conversation topic around the BBQ.
The CoreData Australian Education Survey April 2016 found,
- 84% of families admit to making a big or considerable financial sacrifice to pay for private school fees. The sacrifices include entertainment, holidays, hobbies, paying of debt and home renovations.
- 32% of parents have had other family members assist with paying school fees.
Greg and Nicole have their eldest son in Year 7 in a private independent school in Sydney with plans to enrol their second son from Year 7 in 2020 and their daughter from year 7 in 2022. They have calculated their private school fee commitment over the next 9 years to be between $350,000 and $500,000 (there are a number of calculators available to help get you started Australian Unity Education Costs/ANZ School ready/ASG) this may well change depending on their final choice of schools and excluding additional financial commitments for uniforms, text books and extra curricular activities.
Parents want choice, flexibility, and an assurance they will not be locked into a pre-determined future when looking at options for saving for their childrens education. It is unlikely there will be the one solution to the private school fee puzzle. It may be a combination of specific savings, tax measures and finding the money from your cash flow. Accumulated savings are most needed during the last two or three years of school , when expenses are at their highest. That may also coincide when there are two or three children in secondary school at the same time.
The most common strategies we will discuss over our series of articles in the coming weeks include:
- Repay the home mortgage and then redraw when you need to pay school fees;
- Salary Sacrifice – You may be eligible to pay school fees from your pre tax salary (tax free);
- Education Personal loans – they are like a line of credit to pay for your children’s school fees;
- The Bank of Mum & Dad -this is more common than you think;
- Investment Bond or a Scholarship Plans as a tax advantaged saving plan;
- Direct investments – including shares, endowment warrant, managed funds;
- Family Trusts to own your investments and manage income tax effectively;
- Debt recycling as a strategy to grow your assets and income;
- Downsizing your home – to access equity in your home, free up cash flow by reduce your mortgage;
- Family income – a strategy to review your careers, income and work balance.
In our next article we will look at what is drawing parents to Private Schools.
– Written by Andrew Livermore, WealthPartners Specialist Adviser
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider you financial situation and needs before making any decisions based on this information.
Andrew Livermore is a Financial Adviser with WealthPartners who specialises with professionals and their families. He is known for his method and strategies to help families pay for their children’s private school education in Sydney.
Over the coming weeks Andrew will address a range of topics related to deciding and paying for private education. Andrew will share the lessons and perspective of his family, his wife and their three children on Sydney’s North Shore.