I don’t want to get in the middle of the public school versus private school debate here, that’s not an argument that I can fairly pick a side because we have never sent our children to a public school. What I do know is that I went to a public school and turned out quite well, however I actually would have liked to attend a private school as a kid. That is what led me to send my own kids to private school.
There are differences in the quality of any school and not all children are the same. So you need to do your own research and consider the needs of your own child when deciding what schooling environment will suit them best. A lot of consideration has always gone into my kids schooling choices and we have tried a few options until we found the best fit. But I’m here to talk about the cost of that private school education should you choose this path for your children.
Private schools can range from a few thousand dollars a year for a Catholic School, through to $30,000 a year for an elite independent school. Boarding fees in addition to the tuition can set you back $25,000 a year, less any special allowances you might get if you are situated in a remote area.
A lot of things will impact on your choices when it comes to schooling, your household income, how many children you have (or are thinking of having), your priorities, how motivated your children are academically, any special needs, what schools are in your local area if you aren’t looking to relocate etc etc. At the end of the day they’re your kids, it’s your hard earned money (unless you’ve got a wealthy grandparent in the picture, good for you), and your decision. Don’t worry about what other people think. As long as you and your kids are happy, that’s what matters.
Schooling is something I considered a little bit when we first had kids, but honestly getting through the cost of daycare was the first hurdle, and at that time, in our early 20’s on our low-average incomes, saving for schooling wasn’t an option for us. But schooling over the years has had a lot more of our focus and percentage of our finances as we try to provide the best possible beginning for our children. No matter what you do, there is no guarantee you will get a return on your investment, and I certainly don’t pressure my kids about school performance just because I’m paying an arm and a leg. That was my choice – not theirs. But if you decide to go down the private school path you may be quietly calculating the cost and wondering how you are going to pay for all those years. So if you decide on private school, here are some ways you can fund it:
- Preferably start investing towards a kids education fund sooner rather than later – not the ASG variety though. There are a lot of investment options so this is something you need to seek independent advice for. You can start out with an initial investment and then contribute something towards it each month. You will need some calculations performed to tell you how much you need to invest based on your kids ages and chosen school/s. When those school fees come along you can then make a partial withdrawal from the fund to cover it.
- Pay a regular amount each pay period directly off your home loan or into an offset account which is saving you interest on your home loan. Either way, this can be a nice risk free way of putting money aside for kids education. When needed you can redraw.
- If you don’t have a home loan because you own your home outright, you may just want to save into a high interest bank account. Do your homework on finding the best rate for the style of account you need. With interest rates being cut recently, you may not get excited by the rates on offer especially given that you pay tax on interest earned. So think carefully about this option if you are planning on saving a lot of money. There may be better options like the first point.
- Fund it through cash flow. Some of you will have the funds to do this no doubt depending on the amount of kids you have and what school they attend. However if you have four kids and are planning on sending them all to boarding school, that might not be physically possible. If thinking of funding through cash flow, make sure you think ahead to your most expensive year (for instance when all kids are in high school at the same time) and make sure that will be manageable. Can you pick up some additional income in those years if for instance you are currently working part-time. If it’s not looking likely, you need another plan. You also need to make sure that cash flow is secure -think about income protection insurance as well as your job security.
- Take out a loan. I hate this option but I’ve seen it mentioned in other articles so I’m going to talk about it. Some people apparently extend their home loan (assuming you have the equity) to pay the kids school fees. Obviously it’s a less expensive way from your cash flow to pay it off over 25 or 30 years, but think about the interest cost and therefore the total cost of all those repayments. Yuk! This is my least favourite option. It’s probably not so bad if we are talking just a small loan, or if you can afford to pay it off in a relatively short time frame because you are getting a big work bonus or waiting for the sale of an asset to pay it off. But think very carefully about that interest cost if it’s going to be paid back over many years.
This is not an exhaustive list but these are some of the main funding methods of choice and something to consider if you’ve recently started doing some maths on sending your cherubs to a private school. As per the disclaimer below, seek personal advice if you need to.
Shonel x
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Unless specifically indicated, the information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek personal advice from a financial adviser.
Shonel Vuletich is an authorised representative of Synchron, AFS Licence No. 243313.
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