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Ten top tips for coping with private school fees
Most of us will beggar ourselves to give our children roots and wings but it’s important to really understand the costs and issues of funding private education for your children.
This is a major financial decision that will shape your whole life. If you get it wrong, you could end up selling the house and having to take your children out of school. Here are 10 tips for coping with private school fees:
- Expect costs to continue to rise
The biggest overhead for schools is teaching staff, whose pay tends to outstrip inflation. With UK private schools attracting enormous interest from Russian oligarchs and the growing number of massively wealthy families in Asia, these schools are under no pressure to keep fees down.
Those planning to educate their children privately need to budget for fees that will continue to rise and to take account of the fact we’re always sailing into an uncertain fiscal environment that may undermine your ability to pay fees.
- Don’t assume the costs end with fees
It’s easy to underestimate the cost of extras. School uniforms increase in price. You’ll also come under enormous pressure to pay for school trips – year upon year of sports tours and ski holidays all add to the bills.
You have to remember the peer group you are putting them into as well. If they are mixing with the children of oligarchs, it alters aspirations and perception of wealth. It will be important to keep your children grounded.
If you take the boarding option, that will add to the fees. Now you have to contend with £9,000 a year of university fees too, so the pressure can really build.
- Consider if you need to use prep schools
Many people try to reduce costs with a hybrid approach, using state junior schools and then private secondary schools.
However, competition can be tough for the best schools and you may need to think about preparatory school to prepare them for the entrance exams.
- Location issues
Your choice of school may have a bearing on where you choose to live.
If you want to avoid boarding fees, you may need to live close to the school, which can be a major financial decision.
- Consider insurance, remember your will
Many people will be paying fees out of income, which means they will need to consider permanent health and critical illness insurance as well as life cover.
You also need to think about what would happen if one of you did die. If the main earner is to continue working full-time, there may be the need for not only a nanny but also a housekeeper, which means insuring both partners.
Have you guardians who will take care of your children and have you given them the wherewithal to continue the educational path you have chosen to minimise the disruption to your child at what will be an incredibly difficult time? Do your guardians have children at private school too? If not, will that create issues? You will need to make your decisions clear in a will and consider powers of attorney.
- Give careful thought to how grandparents contribute
Many can only send their children to private school because of financial help from grandparents, which can create issues if not thought through carefully. It is, in effect, a way of passing wealth down the generations. If you help pay for one set of grandchildren to be educated privately, what about the others? How do you compensate any of your children who are childless?
If you are funding the education of grandchildren, consider how it is done – it may be sensible to make the gifts to the grandchildren rather than the children. If you’ve given the money to a son or daughter and they get divorced, half of it could end up going to the spouse in the divorce settlement and not being used as you expected.
- Tax plan
Many people will be paying out of debt, leveraging the costs over a lifetime of earnings, so that takes careful planning, balancing budget choices between paying down the mortgage or the school fee loans and paying in to pensions.
It may be worth using the tax breaks to pay into a pension and then paying off outstanding school fee debt with the tax-free commutation. Many will want to save into ISAs before they have children.
- Invest
If you do have savings you plan to use to cover fees, it’s important to consider how they are invested – whether you need capital growth and what risk you can sensibly take to achieve it.
- Negotiate
For those who have the capital it may be worth going to the school and speaking to the bursar to negotiate fees. If the school is looking to fund developments like an Astroturf pitch your discounted prepayment of several years’ fees may be a preferred option to a bank loan.
If doing this, think how you might retrieve your money if your child gets expelled or you decide to pull them out because of issues like bullying.
- Ask – ‘is it worth it?’
My eldest child is 29, and my youngest is now at university. Would I do it again? I’m not sure. The strain of paying is getting greater and greater, particularly when you take taxes into account.
Many state schools are better than they were, and there’s less peer pressure amongst the upper middle classes to follow the private route. A lot of people paid for private education to help their children build strong peer connections, but with the globalisation of our private schools the perceived value of that is arguably diminishing.
This is not a simple decision, and there are many factors that will influence a decision. Do what’s right for you and your children, but recognise the full financial implications before you begin the journey.
Charles Calkin is head of financial planning at James Hambro & Co
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