School Fees Planning

Giving children a private education is the dream of many parents and grandparents. However, during a child's education, school fees can cost in excess of £100,000, making forward planning essential.

According to government statistics, over 75,000 pupils attend London's 184 independent schools alone and with academic achievements almost 50 per cent better than state schools at GCSE level and 30 per cent better at A level, it is easy to see why many parents consider this an invaluable investment. Average school fees per term in London are around £5,000 a term for full-time boarders and £2,100 for pupils at day or prep school.

Independent school fees usually rise at above the rate of inflation. It is also worth remembering that compound inflation will take its toll on costs, for example, a school fee of £10,000 a year will cost £20,000 a year in ten years' time if the fee rises at seven per cent a year. Almost one private pupil in three receives financial assistance from either scholarships, school bursaries, charitable trusts or family and some schools let you pay up-front while guaranteeing a discount on all or part of future fees.

For those with immediate needs but without the necessary funds, the cheapest and most common way to raise money is to utilise the equity in your property. Otherwise, forward planning can be invaluable.

Some of the points to bear in mind when planning include how long you have before you start to pay fees, your current and, hopefully, future number of children, the estimated level of fees and increases, and your income, assets and any possible inheritance.

Many people are simply too busy making money to make their money work for them. This is true when money is left in a savings account for long periods of time, or tax saving opportunities are missed.

Tax planning and making investments are two of the most important tools in your armoury. Think first about your attitude to investment risk, your tax status now and what it is likely to be when your investments mature, and whether you want to invest a lump sum, a monthly amount or a combination of the two.

The use of an accumulation and maintenance trust and of the capital gains tax free allowance for both parents and children are two of the most valuable instruments available when parents come to tax planning.

When investing, some of the longer-term alternatives to a cash deposit are: 

· National Saving
· Government stock (gilts)
· Individual Savings Accounts (ISAs)
· Corporate bonds
· Property
· Equities (shares)
· Unit and investment trusts
· Traded endowment policies

As a contingency it is essential to review your existing life, critical illness and income protection insurance to take account of the increase in outgoings that school fees incur. The correct level of insurance can offer both continuity and peace of mind.

And remember a private education could be one of the most important investments you ever make. Therefore it is imperative that you plan ahead and take taxation and financial advice to ensure that you find the best way of investing in your child's future.