The standard of education offered by independent schools and universities is valued by parents as you wish to give your children the best possible chance to achieve academically. Private school fees can be expensive and unfortunately, without forward planning, it is easy to significantly underestimate the real cost.
Fees for private schools are on the rise, in fact, fees have risen ‘four times faster than average earnings’ according to a study by Business Insider UK and they suggest that fees now represent 39% of the average salary of £34,500.
Assuming inflation of 2.5%, to put a child through 10 years of private education, as a day pupil, could cost £208,300. For a boarder, this figure could easily be doubled. If we consider the average increase in school fees over the past 17 years, this is actually an annual increase of 5.4% and the amount needed to fund school fees may well be more. What’s important to be aware of is that these figures are just the school fees and does not take into account the costs of the ancillaries such as uniform, school hobbies, trips and so on.
University fees, whilst not so imminent, also need to be considered. Fees increased this year to £9,250 per year and whilst your children can take out a student loan to cover these costs, the rates of interest are due to rise from 4.6% to 6.1% in the autumn. Your children are also entitled to maintenance loans to cover their living costs, e.g. food, books, accommodation and travel. Currently, this is £8,430 for those living away from home attending a university outside of London rising to £11,002 for those studying in London.
Up to 65% of this is non-means tested, whereas the balance is subject to the parental household income (the loan reduces where household income exceeds £25,000 as parents are expected to contribute to living costs).
As a drain on household expenditure, education costs will be significant, so what is a parent to do?
This all depends on what stage of life you are at and how much capital you have at disposal however, the 5 key things we believe you should consider are:
Private school and university fees can be a significant concern however, with careful financial planning we can work with you to reduce the burden and stress of funding your children through their education. We achieve this by maximising the tax efficiency of your investments and target capital growth over and above that of school fees inflation.