Beat school fees shock
How to prepare for one of your household’s biggest expenses.
Our children's education is extremely important and it can also be expensive.
There are costs regardless of whether you choose private or public schooling so, as with any major financial decision, the earlier you plan for them the better.
With only 52% of parents budgeting for school expenses*, let’s look at a few options available to set you on the right track.
What are the costs?
While public schools are less expensive, they're not free. According to research from RACQ, Queenslanders expect to spend an average of $2600 on school fees this year*.
Parents will also dish out an average of $1100 on school supplies, textbooks, digital learning tools, uniforms and extracurricular activities*.
Private school fees can vary considerably depending on the school chosen, the grade of the child and the subjects they choose.
When selecting a school, be mindful of inflation and costs rising.
Calculate the overall cost for the time a child will be at school to work out if you can afford it, not only now but in the long term.
Funding the costs
There are a number of methods to pay for schooling.
The easiest option to fund you child’s schooling is to open a separate bank account for school fees and other expenses.
Making regular deposits will help to spread the cost out but you must have strict discipline not to dip into it for other emergencies.
It’s important to note that low interest rates on deposit accounts may make it hard to stay ahead of inflation and rising costs.
Home loan redraw
Some people choose to redraw money from their home loans.
While this approach may work if you have surplus funds, consider making extra repayments to your home loan to ensure there is enough money in your redraw or offset facility for ongoing expenses.
Investing in an education bond is another alternative.
An education bond provides tax-effective, dedicated savings specifically for education.
The fund is taxed on its investment earnings at 30% but when money is taken out to pay for schooling costs, the fund can claim the 30% back – a saving that's passed onto you as the parent.
Be careful when choosing an education bond to ensure you can use the money when you need it as some funds only release money for certain schooling expenses or higher education.
Scholarships and savings plans
If your child is already at school, talk to them about a savings plan or scholarships on offer to ease the burden.
As with any major cost, the earlier you start to save, the easier it will be to manage.
Whatever you decide on to fund your child's education, make sure it's something you can not only afford now but continue with in the years ahead.
*Source: RACQ Quarterly Consumer Omnibus FY21 Q3 Results.
The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.