School Fees

A good independent financial Advisor can talk you through the options and help plan how to pay for your child's education. Planning for it can help you to give your children the education of your choice.

Do you realize how much private education can cost?

People just do not realize how much private education can cost. And things do not just stop at age 18. There is the cost of further education to think about and university fees which students must pay towards themselves.

Muddling through on a term by term basis is becoming almost impossible. So how can parents hope to cope with such enormous costs? The first step is to work out how much you are likely to need. It is better to overestimate than underestimate because it is likely to cost more than you might expect.

But it is important not to base your planning on over optimistic growth assumptions for your chosen investment. And you need to decide how much risk you want to take with your money.

How are you going to save?

The next thing to do is choose how you are going to save for the cost. You can choose a specialist school fees plan or put together a package of your own. Specialist plans can offer a simple way of saving because they provide a one-stop solution, but you may pay higher charges as a result.

IFAs can help you plan your own package. They will run through the options. Suitable products for school fees planning are investment bonds, endowments, unit trusts or investment funds of Open-ended Investment Companies and Individual Savings Accounts.

What is an investment bond?

An investment bond is a single premium plan bought from an insurer. For school fees planning, you can invest long enough to avoid penalties for withdrawing money and then you can take money as and when needed. Endowments can be bought as bundles, timed to mature as school fees are due. Endowments offer reasonable growth but returns are usually less than what you can get from a stocks and shares investment, like a unit trust or investment funds of Open-ended Investment Companies.

The past is no guide for the future

Past performance is not a guide to the future. However, an endowment is a safer form of investment so if you do not want to take too much risk it is worth considering. And some insurers offer better returns than others.

Another investment that could be used to save school fees is an Individual Savings Account (Isa), introduced in April to replace Peps and Tessas. There are two types of Isa – mini and maxi. They allow different sorts of investment from cash to stocks and shares. A maxi Isa is probably more suitable for school fees planning but an IFA can take you through the options.

Investing in a maxi Isa allows you to save up to £7,000 this tax year in stocks and shares. Make sure you do not want to use your Isa limit to save for yourself because you can only buy one a year. You need to be careful when investing in an Isa because of the high equity content. There could be a downturn in the stockmarket and you may find the fund for your child's school fees has dropped. On the other hand you may do well and have a little left over.

“The average cost of putting a child through private education is reaching astonishing levels”

You must obtain advice from an investment adviser.