Schools of thought

1 Mar 2010

As we head into March, the kids have now returned, perhaps reluctantly, to school. While that might mean some respite in terms of noise levels in your house, it won’t bring any budgetary respite – after the excesses of the holiday season - if you aren’t ready for those school fees.

If you don’t have children in school yet, now’s a good time to look at your options because there are different schools of thought about how to best prepare for your education expenses. The good news is that unlike parents already battling with the annual costs of education, you’ll have the benefit of building up some savings before they reach primary school.

While most Australian private schools are amenable to parents paying fees by instalments, it can still be a challenge to your cash flow, especially if you have more than one child in the system.

Counting the cost

Fees vary considerably from school to school and from primary to secondary level, so it is difficult to give a definitive answer as to what you’re likely to pay. Like any other major ‘purchase’, it pays to shop around, and local school websites are a good place to start. 

If you’re looking at private education, standard fees can be anywhere from $5,000 up to almost $20,000, per year, depending on the school you’ve chosen and whether your child is starting at primary or secondary level.  Fees are usually indexed too, so you need to allow for a slight increase each year. On top of fees, you’ll also need to budget for uniforms, sports clothing and equipment, books, stationery and laptop computers, excursions and camps, extra-curricular activities, lunches, travel to and from school, and possibly private tuition or boarding fees.

What to do?

In previous issues we’ve recommended setting up a Separately Managed Account, or SMA, to help with the onslaught of education expenses. SMA’s are relatively simple investment structures that allow you to hold shares as well as make direct deposits such as an inherited lump sum or regular investments from your salary.

If you’re not in a position to set up an SMA you might want to look at how you can use an offset account attached to your home loan as an option. This will allow you to make regular deposits into your offset account or directly into the home loan account, and use the drawdown facility to access funds for school fees.

When it comes to saving for, or simply coping with school expenses, it’s best to discuss what might work for you with a ‘well-educated’ financial adviser. 
 

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