I am yet to have a child and I am already wondering how on earth it is I am ever going to afford to educate them. Friends of mine are paying private school fees that literally make me gasp. Though regardless of whether you pick private or public for your children’s education, the cost will still be significant I am learning.
It’s actually got me thinking I had better act now if I am to stand a chance and still have money to eat come school time.
Here are some of the ideas I have come up with to help kick start the savings for education, with any luck I will have some left over money to treat the old version of myself to a holiday once the kids eventually move out.
How much is education going to cost?
First things first, you need to seriously start thinking about all the costs involved in schooling if you are going to understand how much money you will need. This may be exacerbated by the number of children you have or are planning to have.
Obviously the largest cost is going to be school fees and this is going to be dependent on private vs. public school.
Private school fees vary tremendously and they do continue to rise each year, they also get more costly as your child ages (higher costs for higher ages). So Year 12 school fees are going to cost more than Year7 school fees.
Most of the private school fees are now around $20,000 and upwards annually. There are also enrolment and administration fees which need to be added. If you put your child’s name down at multiple schools it is going to cost you a couple of hundred dollars to have the privilege so be cautious that this money isn’t refundable in many cases.
There may also be extra fees which may or may not be compulsory for parents associations, building funds, library funds and so on.
Other significant costs involved in education are uniforms, which are going to be needed to be constantly replaced as your child grows. Remember there are second hand shops usually available at your school. Textbooks are another whammy, plus there is stationary, laptops, sporting gear, excursions and don’t forget extracurricular activities such as music lessons.
So how are you going to pay for all this?
Start piling extra cash onto the mortgage, today!
Ensure that your mortgage has a redraw function and begin paying extra today. Whether it’s a few dollars extra or thousands of dollars, it will begin to add up, especially if you are yet to have kids.
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This will save you interest on your home while growing a redraw account that can be used to draw down school fees or supplement any short fall you might have from your salary.
Don’t have a mortgage? Never to fear, open a high interest savings account that is separate to your daily banking and try and load it up every pay cheque.
Investments with potential capital growth
Consider long term investments, such as managed funds and other forms of investments that offer capital growth. Investing comes with risk, so be sure to speak to a professional so as to not risk your hard earned money with poor investment choices.
If the fund is designed specifically for education and it fulfils the requirements of a ‘scholarship plan’ under the Income Tax Assessment Act, tax concessions may apply. This means you may be eligible for a tax break on the investment. Examples of these funds include: Australian Scholarship Group, Australian Unity - Lifeplan Education Investment Fund and School Plan.
Talking to a financial planner will help, as they might be able to show you some tax effective investments for your education investment plans and show you how to diversify your money to help lower the risk of investing.
More: Planning for private school fees
Consider salary sacrificing
Depending on where you work, you might be able to salary sacrifice pre-tax money to pay for school fees. This has fringe benefit tax issues however. Lost yet? Me too. See your accountant or planner and ask them what this means.
In basic terms you might have the ability to reduce your taxable income by paying for your school fees with pre-tax dollars.
Find out about scholarships
Look into scholarships. They sound very Hollywood to me, but apparently they are alive and well and many schools are offering them for a range of talents and needs. It can’t hurt to research, especially if your child is particularly good at something such as music or sports.
Does the school provide discounts?
Many schools offer you a discount for paying fees by a certain date. Look to see what other discounts might apply as every dollar counts.
One school I read about offered you a significant discount if you paid the school fees upfront for an entire year. Nearly impossible for most, but may be worth investigating if you have some extra savings.
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Alex Wilson is the founder and editor of Savings Guide, Australia’s number one saving money website. For regular money saving tips, visit Savings Guide or follow Savings Guide on Facebook.