Reviews and Ratings for Financial adviser Chris Wheatman, Lancaster

School fee rise outpaces inflation. It’s more important than ever to start saving early

School fees are rising. If you plan to send your child to a private school, calculating the potential expenses and creating a saving plan early can make all the difference.

Inflation has been making the headlines after the cost of living increased by 5.5% in the 12 months to January 2022, according to the Office for National Statistics, but a report in the Times suggests school fees are surpassing this. After a small increase in fees in 2020 of 1.1%, for the current school year, they have increased by as much as 6.5%.

In the UK, around 1 in 20 school children are privately educated, with the majority of these attending day school. A report from the Independent School Council (ISC) found that the average day fee for each school term is £5,056, or £15,191 for each academic year. Boarding school fees are typically more than twice those of day school fees.

So, putting a child through private education until they’re 18 could cost the best part of £200,000. If private education is something you’re thinking about, creating a savings plan early makes sense.

How to build up an education fund for your child

To make education part of your financial plan, the first step is to calculate how much you will need annually and in total. While the ISC report provides an average, keep in mind that the cost for each school term varies a lot between regions and schools. You should also consider how inflation will affect the cost of your child’s education.

Once you understand how much school fees will cost, it’s time to make it part of your wider financial plan. This could include incorporating the fees into your annual budget, setting up a savings plan, or putting a lump sum aside.

One of the things you need to consider is whether to save or invest. In some cases, a hybrid approach can make sense.

Saving has the advantage of keeping your money secure. However, as the interest rate is likely to be lower than inflation, the value of your savings could reduce in real terms.

In contrast, investing can help your education fund to grow, but it will be exposed to investment risk. As a general rule, you should only invest with a long-term goal that’s a minimum of five years away.

If you’re setting up an education fund, you will likely need to access some of the money in the short term, but some of it may be earmarked for expenses more than a decade away. As a result, holding part of it in a savings account while the rest is invested can help you balance short- and long-term needs.

We can help you make your family’s education part of your financial plan.

The average university student leaves education with more than £45,000 of debt

In addition to covering school fees until your child completes their compulsory education, you may also want to think about university.

According to the ISC report, the majority of privately educated children will choose to go to university. Just 2.2% of pupils went straight into employment and 1.1% choose further training, such as apprenticeships. So, while university can seem like a long way off, thinking about it now can help create long-term security.

UK students can take out a student loan to cover the costs of going to university, including living costs, which they don’t have to pay back until they earn above a certain income. According to the Guardian, the average student that graduated in 2020 had £45,060 of debt.

Setting up a fund that could be used to pay for university or other milestones as your child reaches adulthood can provide them with more freedom and reduce financial pressure.

As with school fees, thinking about whether to save or invest to reach your goal is important.

If you’d like to discuss what steps you can take to create a fund for your child, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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