Write out 100 times: ‘I must get saving to pay for school fees’
Paula Hawkins studies how parents can raise the money to meet costs of nearly £10,000 a year
The cost of sending a child to private school is eye-watering for all but the richest parents: on average, nearly £10,000 a year. If you want them to board, the figure is just shy of £21,000. Nevertheless, the lure of a private education is strong for hundreds of thousands of British parents.
“Many people in their twenties and thirties come to see us about school fees,” says Justin Modray of independent financial adviser (IFA) Bestinvest. “In some cases we really can’t help them – people don’t fully comprehend quite how much a private education is going to cost, and they have unrealistic expectations about how much they will need to save.”
Only the really well-off can pay for fees from their everyday income. The rest have five options: rely on relatives; remortgage; cash in a pension; save and invest really hard; or get their hands on a school bursary.
Gifts from relatives are an increasingly popular way to fund the fees. “Many grandparents are now sitting on potentially high inheritance tax [IHT] liabilities,” says Mr Modray.
By gifting £3,000 a year to their grandchildren for school fees, they can reduce the eventual IHT liability on their estates.
Remortgaging is another option, making the most of house-price inflation. If you have paid off a substantial part of your mortgage, you could simply draw further equity out of the home.
Alternatively, if you have a big home loan and are on the standard variable rate, switching to a lower fixed or discounted deal could net a big enough saving to finance school fees.
If you’re an older parent, over 55, and have substantial pension savings then you could use some of this for private schooling. Under rules brought in last year, you can take up to 25 per cent of your private pension pot as cash, leaving the rest invested. But remember: once it’s gone, it’s gone.
If you plan to fund school fees from investment, then the key is to start as early as possible, allowing your money the maximum period for growth.
Anna Bowes, investment manager at IFA AWD Chase de Vere, advises parents to invest in a range of assets, rather than just one. “Like any financial plan, you should consider the inclusion of fixed-interest funds and commercial property as well as equities, depending on the risk you are prepared to take.”
But Ms Bowes warns against the heavily advertised “school fee savings” products, explaining that these are little more than a marketing ploy, often with high upfront fees.
The final option for parents is to apply for a bursary – the means-tested financial handouts to parents who need help with fees. These have been growing in importance in recent years, with the proportion of private-school pupils receiving a bursary rising from one-fifth to nearly a third since 2000. Contact the schools you are interested in to see what bursaries are on offer.
But whatever option you go for, putting together the cash for private-school fees is likely to be a long, hard slog – as gruelling as revising for exams.
