As a financial stylist, it's probably obvious that we have a family budget. We therefore budget for not just school fees, but also additional school costs as well like uniforms, shoes and stationary.
I feel like this year though, the costs have increased more than expected, and our budget sometimes struggles to keep up.
I wasn't surprised then to read the 2018 costs of education report released by ASG. It compares Government, Faith and Private school fees.
The costs obviously vary greatly between these options, and also between metropolitan areas and here in regional Victoria. For each child's 12 years of schooling, you can pay between $52,000 in Government schools, and $381,000 in private schools. In metropolitan areas, this increases to between $72,000 and $550,000! Yes, that's a significant investment in your child's education.
So how to prepare?
You can include an amount in your budget each year to cover all of the school costs - remember, not just fees. For example, if you determine your school fees and add expected costs for like uniforms, shoes, books, supplies and after school activities for the year, divide this amount back to what it is on a weekly or fortnightly amount, and move that money into a separate bank account specifically for school expenses. You then have money set aside to cover the costs during the year.
This assumes that you will be able to afford this amount into your budget each year.
Otherwise you can research how much you are likely to pay over the course of the school years. That way you may be able to start budgeting earlier, or build up a savings nest egg to go towards the costs.
Here are three things you can do now to help cover your family’s education costs without sacrificing your lifestyle.
1. Create a savings plan
By putting aside a little bit of money on a regular basis, you can grow your savings so you’ll have money to put towards your child’s schooling. A simple way to do this is to set up an automatic transfer from your everyday account into a high-interest savings account. Once you get started, you’ll notice the interest compounding over time. As you get into the habit of saving, you’ll find it becomes easier to manage your short term expenses like school fees and uniforms.
2. Invest your savings
While a savings plan is great, it’s important to know that education costs may rise faster than inflation. This means your cash savings might not grow enough over time to meet your child’s future education costs, and you might want to consider non-cash investments as well. By investing part of your savings in an investment bond or managed fund, you may find it easier to cover education costs over the longer term, based on the anticipated growth and earnings from these investments. So it’s worth speaking to your financial adviser about the best investment vehicle for your situation.
3. Pay down your mortgage
It can be tough keeping up with school fees and other costs when you still have a major financial burden hanging over you.
That’s why it’s a good idea to start paying off as much of your home loan as possible before you child starts school, so you’re in a better financial position to manage their ongoing education costs when the time comes.
Even if your child is already in school, it’s never too late for your financial adviser to help you get your finances on track and plan for the remainder of their education.
If you would like any assistance with navigating through your children's school costs, shoot us an email and we will be in touch.
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