The Lessons of Education Fee Planning
Education is an extremely high financial planning priority for many families, and for expatriates even more so, given that the costs are likely to be higher or at the very least harder to predict when working away from home or utilising institutions away from your home country.
Whether it is for private schooling or studying abroad, the rising cost of education fees usually outstrips inflation and costs keep escalating, therefore planning ahead is absolutely essential.
In the UK, the cost of independent education is typically of the order of £300,000 per child, and in the USA the average cost of putting a child through university alone is around $200,000. When you factor in current annual inflation of between 2 – 3% you can see that future planning is a sensible move, yet the vast majority of parents pay their school fees out of income without properly planning into the future.
With competition from both international and local students for places in the best equipped institutions, demand is on the increase, which means only one thing in terms of cost – they will continue to increase year on year.
The table below shows the level of savings required to cover these costs, and the sooner parents can prepare and plan ahead, the easier it is to accommodate the financial outlay.
Regardless of your financial situation there are always good reasons why you should give serious thought to how to plan for funding your children's education. Whether the fees are readily affordable or not, paying from income is unlikely to be the most efficient method. Whatever your circumstances are, setting out a plan for education fees and sticking to it will reduce the cost of private education.
How to fund children's education - what are the options?
As an expat, you have an opportunity which is unique to your situation, in terms of the ability to utilise tax-efficient savings vehicles based offshore. You can save over a period of time in order to build up a pot of money which can cover the ever mounting costs – these would include items such as school boarding fees, university tuition fees, flights/travel, books and other materials, clothing, extended courses, phone calls, board and lodging etc etc – the list is endless.
Monthly or lump sum options are available, and these include many different types of individual funds and investments, depending on your capability, length of time working away from home, and your personal investment preferences.
With an offshore bond for example (which requires a lump sum investment), you can also exercise the right to transfer it into your child’s name when they are 18 – although there may be exit penalties if you withdraw early.
An offshore vehicle has versatility built in and is useful for the expat looking to provide future education funding, as it will move with you wherever you are in the world and continue to grow as you invest.
Child Age Years Until University 3 year University Course Inc Inflation Monthly Savings Required 0 18 £115,200.00 £245.48 1 17 £109,920.00 £264.51 2 16 £104,779.20 £283.37 3 15 £99,787.20 £304.32 4 14 £95,035.20 £336.17 5 13 £90,508.80 £358.04 6 12 £86,203.20 £392.80 7 11 £82,094.40 £430.63 8 10 £78,187.20 £475.94 9 9 £74,462.40 £564.11 10 8 £70,920.00 £650.64 11 7 £67,540.80 £785.36 12 6 £64,324.80 £869.25 13 5 £61,262.40 £988.10 14 4 £58,344.00 £1,166.88 15 3 £55,564.80 £1,462.23 16 2 £52,920.00 £2,075.29 17 1 £50,400.00 £4,581.82 18 0 £48,000.00 £48,000.00
Contact us for more details and we can explain how this can work for you. You can reach us by phone on +44 (0)1245 216030, or via our Contact Us page. We provide independent financial advice for expats and are here to help!