Education Fee Planning – Investing in your children’s Future

The cost of a decent education for your child can run in to thousands of pounds especially if you decide to go down the private school route.

If your child starts at prep school, goes to a good private school and then on to university, the bills can add up to a small fortune over the years – and if you have more than one child can double or treble.

Our school of thought is funding education falls in to three investment classes:

1) Families wanting to supplement fees paid from income

2) Families investing a lump sum that will provide the income to pay fees

3) Families looking at a regular savings plan to pay the fees

Setting up a plan to fund education fees is no different from any other investment plan, except you need to have a robust and effective strategy in place to maintain continuity of education.

This means looking at affordability of the education plan you have for your child.

Few parents have the ability to continually dip in to their income to pay education fees.

Over such a long period as schooling and university, life events inevitability have an effect on income and any education funding should have built in ‘buffer’ or cash reserve to call on when times might be harder.

TIP: One plan for a cash buffer is looking at international life assurance.

Matching your needs to the right savings plan

It’s important to remember that funding your child’s education is tailored to the financial needs of your family.

To make sure you receive the best advice, talk to a professional independent financial advisor whose business is regulated by the Financial Services Authority.

TIP:  Check your advisor is allowed to choose options from the whole of the market and is not tied to a particular financial institution or a selection of preferred providers.

You want the best scheme at the best price and you’re unlikely to find this from a tied advisor or financial institution like a bank

Schooling is a family affair

Many families club together to pay for education fees – this may mean specialist advice about setting up funds, trusts or foundations for grandparents.

This is a specialised financial planning area. Trust planning rules do not make this a beneficial solution for every family.

TIP: Don’t forget to factor in estate planning to look at any inheritance tax issues

Investing in the future

Lots of strategies are available to fund education.

As mentioned above, paying for schooling falls in to three categories.

For instance, a family may be able to afford 60% of the school fees out of taxed income and need a boost from an investment to provide the extra cash.

Another family may have a lump sum inheritance that can be invested to provide an income that covers school fees.

Others may not have any lump sum or lack the ability to fund the greater part of fees out of their income but can afford to put a little away regularly over a long period to build a larger fund.

When’s the best time to start saving for schooling?

The answer is as soon as you can. Even if you don’t have any children now, there is no reason why you can’t start an investment strategy to pay for educating your children.

If plans change or you don’t have children for some reason, then that’s not a problem because you can review your financial plans and put the money to another use – like investing as a lump sum in an offshore bond or a QROPS pension scheme.

Financial planning gives you flexibility

One of the most important points about saving to pay for a decent education or for any other reason is not to start a scheme and just leave it to run itself.

Our Professional Advisors will regularly review the performance of the scheme to ensure it is doing you and your children a service.

Tax laws change, new products come on to the market and personal circumstances change.

These points have to be considered regularly and your financial strategy tweaked accordingly.