Whether you’re already paying for your child’s education or wondering if you can afford it, you’ll know that it often involves cost cutting elsewhere, and almost always careful planning and budgeting. But these sacrifices can provide children with enviable opportunities and experiences (and who needs a foreign holiday or a new car anyway?). We asked David Quintrell, of wealth management firm Brewin Dolphin, to guest blog for us and answer often-asked questions about financial planning and managing school fees.
14 June 2021
Education, as every parent knows, can be a costly business. The average cost of sending a child to private day school is now almost £15,000 per year.1 University tuition fees alone cost up to £9,250 a year.2 Add in maintenance costs for the likes of food and rent, and the expense of a university education can soar.
Many parents – and increasingly grandparents too – are happy to make financial sacrifices to ensure their children receive the best education. What they are buying for their offspring isn’t just academic excellence, but world-class sporting, drama and other facilities, as well as solid preparation for a fulfilling future. On top of that, nobody wants their children or grandchildren to leave university saddled with debt. The good news is that the cost of education need not be a burden if you plan ahead with care. Many people don’t think about how they will fund education costs until their child is about to start school or university. By that time your options will be limited. The earlier you start, the better.
We want our five year old daughter to attend private school from age 11. We are already saving and our school fees pot is growing but, with interest rates so low, we run the risk of not being able to save enough to see her through to the end of A levels. What should we do?
With interest rates at all-time lows, putting at least some of your cash savings to work in the stock market offers the potential for higher returns over the long term. The stock market carries investment risk, but you can mitigate against this by spreading your money across different asset classes, including shares, bonds and cash. Building an investment portfolio that suits your individual circumstances and risk appetite isn’t always straightforward, so it is important to seek advice. If you invest through an ISA, your investment gains and income will be tax free, which could help you grow your school fees pot more quickly.
We would like our children to go to private school but our current family income wouldn't cover the fees. However, my in-laws are keen to help by setting aside a lump sum to go towards covering the costs. What would you recommend?
Your in-laws could either make an outright gift to you, or place the gift in a trust. A trust would enable your in-laws to retain an element of control over the timing of you physically receiving the money. Which trust is right for you and your family depends on several factors. A discretionary trust provides the highest degree of flexibility in terms of who can benefit – it can even include future grandchildren. Investing the lump sum would give it the chance to grow over the long term.
It is really important for your in-laws to have certainty over what they can afford to give away, and in what form (capital or income). One of the dangers of making lifetime gifts is that you hand over money, only to regret it later in life. The key is to give away what you can afford to, when you can afford to, and to seek advice from a professional financial adviser.
How can I make best use of my income and assets to ensure I have money to pay for my children's education?
We use cashflow planning to illustrate how your future finances could be affected by drawing on particular assets now. We can demonstrate what you might need to save and invest to be able to keep paying school fees during your child’s education. We will base your financial plan on ‘real life’ scenarios around your income, outgoings and investment returns. We can also use cashflow planning with grandparents to show what impact a lifetime gift for school fees could have on their own plans for the future.
At Brewin Dolphin, our experts can work with you and your family to develop a tailored education fees plan that can be built into your overall investment strategy. We will do the hard work, building an action plan that makes the most of all your savings and investments to cover education costs in full. We can help you give your children and grandchildren the best start in life.
Sources:
1. Independent Schools Council: ISC Census and Annual Report 2020.
Average day fee £4,980 per term.
2. UCAS: Undergraduate tuition fees and student loans.
David Quintrell is a Director of Financial Planning at Brewin Dolphin. His expertise covers a wide range of financial planning areas, including tax efficient investment, retirement planning and Inheritance Tax planning.
Brewin Dolphin has been helping people to meet their financial goals and fulfil their aspirations for over 250 years. Founded in 1762 it is one of the UK’s leading wealth managers offering personalised financial planning and investment management advice to individuals, charities, trusts, institutions and financial intermediaries. With a network of offices across the UK, Channel Islands and the Republic of Ireland, whatever your plans for life Brewin Dolphin can help you achieve them.
The value of investments, and any income from them, can fall and you may get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Opinions expressed in this publication are not necessarily the views held throughout Brewin Dolphin Ltd.