Funding the future: how to financially plan for your child’s schooling

31/10/2014

With the average annual cost of boarding now exceeding the average annual gross UK salary of £26,500 as reported by the Office of National Statistics, the best thing parents can do is to be organised and start saving as early as possible. Findings of the 2014 Independent Schools Council Census found that across Britain, the average annual fees for day school are £12,723, compared with £28,788 on average at boarding schools. In London, day school fees can be much higher.

So what can you do as parents do to fund your child’s future and save for school fees?

Beyond using general savings options such as stocks and shares ISAs and unit trusts, set out an education plan and strategy based on your individual needs and family circumstances. Some parents opt to school their children in the maintained sector until later in their education to give themselves more time to plan and save. The advantage of starting to invest regularly from the point when your child is born using this strategy is that this gives over a decade until your child starts secondary school. Simon Lambert, editor of the website ‘This is Money’ advises: “the longer term an investment the more risk you can afford to take to build up its value and it may be worth shifting to a less high risk investment as the days when you will need to start paying approach.”

Other parents will wish for their child to be schooled at the earliest beginnings of independent pre-prep and prep education. Taking into account the annual cost of full time childcare, which in London amounts to just under £14,000 a year for a full-time place according to a report by the Daycare Trust and the Family & Parenting Institute, the difference between servicing these costs and the eventual cost of private education narrows.

There is help at hand for parents facing the huge financial commitment of private school fees. Many schools will have a Bursar who will be able to offer advice about the practicalities of fee payments. Paying monthly via direct debit or standing order rather than termly may help, along with the offer of sibling discounts at some schools. Confirm the cost of registration fees and deposits along with the actual cost of termly school fees by factoring in all the incidentals and additional extras (including clubs, trips and school meals) and alter your budget accordingly. David Hanson, Chief Executive of IAPS (Independent Association of Prep Schools) comments: “of course, paying school fees is rarely something parents are able to do without careful financial consideration. Many parents freely admit that they struggle to meet the fees, and make sacrifices to do so. Our schools respect that struggle. One third of the parents of private school children receive assistance with the fees, and you should always talk to the school about what might be possible”.

Unsurprisingly, the need for parents’ assistance with school fees is ever increasing. The 2013 Independent Schools Council (ISC) Census revealed that 33.7% of pupils in ISC schools (166,643 pupils in total) received some sort of assistance with fees and that four out of five of those received assistance direct from the school. Guidance from UK Boarding schools is to also look at other options beyond your child’s school: “there are various education trusts that may help with fees, but under stringent conditions and usually only in special circumstances”.

Looking ahead, find out which senior schools offer means-tested bursaries and scholarships, particularly if your child has a talent in a particular area such as academia, the arts or sports. Many senior schools and some preparatory schools offer scholarships to attract the most academically able and talented children. Of the scholarships offered, most are academic, followed by music and artistic scholarships. These are usually awarded following a competitive exam and/ or interview. Some scholarships may provide a reduction in fees, which depending on each school, may vary from a 20% to 50% reduction for successful scholarship applicants.  Scholarship applications are normally open to all applicants, regardless of financial need or circumstance.

Additionally, bursaries, which are school grants for fee assistance, are another option. The award of bursaries is usually dependent on a ‘means test’ of family income, including capital assets. Priority may be given to current students whose parents have had to seek financial support. Each school will operate its own bursary policy and procedures, and each case is subject to the discretion of the school. Schools will differ in their expectations for certain criteria to be met and each school will outline a range of qualifying considerations.

Whatever, your family’s individual situation, the importance of saving for your child’s future is common to all parents. Peter McGahan, managing director at Professional Adviser notes, “there are different views taken by parents on saving. Some like to create a separate ‘pot’ for each area (school, holidays, weddings etc). Others like to save in one tax efficient area and then draw on that for whatever life throws at them. Either way, the two key issues are tax efficiency and careful management of the funds, especially as the child gets closer to using the capital.”

Xavier Isaac, Head of Trust & Fiduciary at Salamanca Group adds: “trusts can play an important role as they enable parents or grandparents to set aside a lump sum for their children’s education and ensure this money is ring-fenced if anything unforeseen were to happen to them in the future. Trusts can also provide a way of introducing children to wealth more generally and educating them on the responsibilities it brings, by managing the process in a controlled way without giving them full access and spending ability from day one”.

By seeking professional financial advice and by liaising with your child’s school to explore various financial options, parents can do much to help secure their child’s education well into the future.

Gabrielle Villani is Head of Education Services at Salamanca Group and specialises in providing education consultancy for parents and businesses.

www.salamanca-group.com

This article was published in Exclusive, September Edition.