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Planning for school fees and how to cut the cost

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Planning for school fees and how to cut the cost

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3 minute read

Providing a child or grandchild with a first-class education is something highly valued by many people, and arguably one of the greatest gifts a parent or grandparent could give them.

However, this gift comes with an expensive price tag, which is increasing every year. In fact, since 2004 private school fees have increased by 70%, at a much faster rate than inflation and UK salary growth.

The Centre for Economic and Business Research shows private education (from 2015-2028) costs on average £286,000 per child. A good boarding school can cost more than double this figure. Private education is a privilege only 7% of school children in England receive.

Private school fees breakdown table 

Stage Day school (£) Boarding school (£)
Prep school 12,516 23,550
Secondary school 14,103 31,854
Sixth form 14,538 33,729
Information sourced from ISC

So, how are the parents of that fortunate 7 % affording the cost of education and what do they need to consider when deciding upon private education for their children?

Firstly, what to consider when thinking about private education:

Expect fees to rise – on average around 3.5% a year - Inflation, growth in salaries and increased amount of interest from wealthy families in Asia and Russia wanting to send their children to English boarding schools, mean that private education fees may continue to grow.

Don’t assume the cost will end at fees – School uniforms and regular school trips all add up. There will be extra-curricular activities like art, drama, music, and sport to absorb as well.

Boarding can be more than double the cost of day school – By deciding not to board, annual savings of around £15,000 annually per child can be made. So, consider the location of the school, and consider whether it is feasible to commute every day or weigh up the advantages of relocating close to the chosen school.

Mixing private education with state education – Many parents are now delaying private education until secondary school to reduce the cost to below £100,000.

Planning for and researching the right school is often the exciting element, particularly when Open Days allow tours of delightful schools in bucolic surroundings. The hard work starts when analysing how the long-term annual costs are going to be paid for.

Here are four suggestions on how to manage the costs of private education:

  1. Get a head start – Put simply, the financial planning can’t start early enough, even to the extent of allocating money before any children are born. Simply paying school fee costs from current income or capital removes the ability to benefit from the 8th wonder of the world (according to Einstein), which is the magic of compounding returns.
  2. Advance schemes - If you can afford to pay for several years in advance you may be able to get yourself a good deal from the school. Some schools offer to put that lump sum in low-risk investments, and because of their charitable status, they’ll avoid paying capital gains tax on any returns they make. In exchange for pre-payment, a fee discount will be offered by the school. There are terms and conditions and strings attached, but this is worth investigating.
  3. The bank of grandparents - Grandparents may want to consider helping to pay for grandchildren’s school fees or additional extras such as schoolbooks, trips, and uniforms. If grandparents do have the capacity to help financially this could mean that a useful by-product could be a reduction in their own inheritance tax liability, along with the joy of the gift.
  4. Discounts and scholarships - Although discounts aren’t always publicised and can sometimes be discretionary, it costs nothing to ask. A lot of private schools are willing to provide discounts for enrolling multiple children or even paying fees by monthly direct debit. Always ask about any scholarships or bursaries your child might be eligible for. According to the Independent Schools’ Council, a third of children educated at a private school now receive some sort of help with fees.

Private education is not a feasible option for every family, and with an excellent selection of state schools on offer, it doesn’t have to be the only good option. There are many other ways to invest in your child’s future, for example, if you invested the money you would have spent on day school fees for a full 14 years on your child’s behalf, you could provide a sum which could be used to potentially fund university, buy them a house, learn a new skill or set up their own business.

At Capital, we believe in investing in a bright future.

If you are thinking about funding for private education and would like some help with the complex planning for this, please contact us on 020 7398 6600 or sophie@capital.co.uk or contact your personal Capital planner.

The value of investments can fall as well as rise. You may not get back what you invest. This blog is for general information only and is not intended to be individual advice.

 

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