Education Fees Planning

All parents want their children to have the opportunity of the best educaiton their wealth can buy. However it can cost over $250,000 to fund a child through secondary private education and university, and it is not unusual for fees to rise between 3-5% per annum. Costs can also increase dramatically for students wishing to study overseas.

It is vital that you address this issue at an early stage. Education fees planning is not an exact science, but sensible assumptions can be applied to remove a large part of the guesswork. We quantify your education funding needs and then suggest a clear financial strategy to ensure that your child gets access to the best higher education your investment can buy.

Considerations:

  • Your child's current age
  • How much you have saved to date
  • How many more years before college commences 
  • What are the anticipated annual fees, and by how much are they increasing?
  • Which country? Will you need a particular currency?
  • Length of the course
  • Expected living costs (rent, food, etc.) and parental visits

Funding Your Children’s Higher Education

In America for example, 4-year college fees, depending on its status as State or Private, could typically cost $40,000-$160,000 excluding extras. College fees typically rise by about 3-5% per year so it is futile to invest in a low yielding asset like a bank account which cannot currently keep pace with the rate of rising fees.

Solutions

Unless a child achieves a full scholarship, you may need to do one or more of the following:-

  • Pay from your salary at the time it is needed;
  • Donations from a third party, e.g. Grandparents;
  • Raising a mortgage or personal loan;
  • Pay from accumulated savings, or withdrawals from investments.

Solely relying on having enough money from salary at the time your child enters college is a dangerous strategy. Many people cannot rely on family and you should avoid loans so you must usually save from salary in advance and/or invest accumulated cash:- 

1. Invest Accumulated Cash

Many options are available including actively managed investments, which aim to provide returns greater than cash but without undue risk. 

2. Regular Savings Programs

If you have the foresight to start saving when your child is born, you have 18 years to accumulate funds for college. For example, should you need a college fund of US$200,000 and the regular savings program achieves an average return of 7% per year, the commitment would be approximately US$550 per month. However, if you avoided planning until your child was 10 years old, the monthly contribution would be US$1,250 per month. Like retirement planning, the cost of delay is huge.

It is never too early to start a college fees program. The dangers are inaction and under-estimating the true costs of children’s education. There are few more crushing blows than parents realizing that they cannot afford to send their children to a college or university of choice. Don’t let that happen to you!

To discuss funding options, please contact us.