Education costs can account for a huge slice of the family budget. The costs of school fees, uniforms, books, excursions and extra-curricular activities can really add up.
Education costs are usually a long-term goal that can take more than 5 years to achieve, so it's never too early to start planning.
HOW MUCH WILL THEY NEED?
How much money they will need will depend on whether you want your children to attend public or private schools, and whether they plan to take up a post-secondary education after that?
For example, if you send two children to a private high school which costs an average of $20,000 a year for each child, by the time they both graduate you will have spent $240,000 on school fees. And that's not counting extras such as school uniforms, trips and sporting clinics.
Public schools are much cheaper but there are still extra tuition fees, textbooks, uniforms and school camps to pay for so a bit of planning and an early savings plan reaps benefits for them later. The earlier you start saving for your children's education, the better. Education costs are usually a long-term goal that can take more than 5 years to achieve.
SAVINGS OPTIONS SHARES? TERM DEPOSITS? EDUCATION FUNDS?
Once you have clarified the financial goal you are working toward, you should consider your other financial obligations. For instance, you might be better paying off your mortgage where you have access to a redraw facility or paying off some other short-term debts first before you start saving. After all, there is no point in leaving yourself short every week and dipping back into those savings.
To help you reach your goal, you could put your savings into a number of different savings structures like: shares, managed funds, term deposits, savings accounts, investment bonds, or education funds. We advise parents to use help their savings grow by using a structure that pays compounding interest.
Education Funds are special funds to help save for children's education. If you are considering an Education Fund you should check the following to make sure these funds fit your long term financial plan.
Here are some questions to ask before you invest in an education fund.
· Fees - What fees will you be charged?
· Contributions - How much do you need to invest and how often do you need to contribute? Can other people, such as grandparents, also contribute?
· Investment options - What investment options are available, and do the suggested timeframes for these options meet the timing of your children's education needs?
· Fund purchases - What can you use the savings for, for example can you use them for primary, high school or tertiary studies? Do they cover expenses such as clothing, laptops and excursions?
· Access to funds - What criteria need to be met before you can access your funds? What happens if your circumstances change, or if you can no longer contribute to the fund? Do you lose all that you have invested? How difficult will it be to withdraw your money if your children's priorities change? For example, what happens if your children decide they don't want to do tertiary studies?
You should compare the features of an education fund with other investments such as term deposits and managed funds. In particular, you need to consider the Product fees, features and benefits and how the fund is taxed compared to how other investments are taxed. A tax agent can assist in unrevealing the complexities of these types of investments. If ever in doubt, contact us for an appraisal of the Fund.
AND, WHEN OUTSIDE ASSISTANCE IS NEEDED
Financial Advisors If you need help with a financial plan to save for your children's education, or if you need more information about education funds, consider getting financial advice from a qualified financial adviser.
There are quite a few assistance programs to help parents cope with the extra costs of school.
Saver plus matched savings Saver Plus is a program to help families on low incomes develop savings habits, and could help save up for larger school costs like fees and excursions. It helps you reach a saving goal and then matches it dollar for dollar, up to $500. Find out more about Saver Plus.
Government assistance some financial assistance is available to families on a low income. Some are means tested or require parents to hold a concession card.
In Queensland you may check out: Textbook and resource allowance