Giving children a private education is the dream of many parents and grandparents. According to 2015 research carried out by the Independent Schools Council (ISC), which represents 1,267 independent schools in the UK and overseas, they are now educating 517,113 pupils, the highest figure since records began in 1974.
With the ISC figures suggesting that at A level, 51 per cent of entries achieve A* and A grades, compared to 26 per cent nationally, it is easy to see why many parents consider a private education an invaluable investment.
However, other research published in 2015 indicates that the average annual cost of day and boarding school fees are now £13,194 and £30,369 respectively and that fees have more than trebled since 1990, while continuing to rise at levels above inflation. It suggested that the total cost of an independent education in a day school over 14 years was around £286,000 and £468,000 at boarding school.
However, around one private pupil in three receives fee assistance, for example through scholarships, school bursaries or charitable trusts. Some schools also offer the option of paying a lump sum up front, which then attracts a discount on future years’ fees.
For those with immediate needs but without the necessary funds, the cheapest and most common way to raise money may be 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 Savings and Investments
- Government stock (gilts)
- Individual Savings Accounts (ISAs)
- Corporate bonds
- Equities (shares)
- Unit and investment trusts
- Traded endowment policies
Investments in stocks and shares do not have the same degree of capital security as investments in cash deposits.
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.
The value of investments can fall as well as rise and you may not get back the full amount invested.
Levels and bases and reliefs from taxation are subject to change and their value depends on the circumstances of the individual investor.