For many, the thought of paying school fees for five, ten or even fifteen years looms on the horizon like an insurmountable mountain to climb.
Heated discussions can ensue about which schools you should apply to, whether your children should board or not, or even whether private school is the right choice.
As you start to juggle the figures, family holidays, a new car and funding your own retirement can start to feel like inevitable sacrifices. And what about university fees after that?
This all begs the question: how much do you need to earn to afford private school for your children, and what is the best way to fund it?
The cost of private education
The average annual cost for a senior-aged pupil was £33,000, and that figure doesn't include the extras needed for activities such as sport, music, art and the cost of uniforms and school trips.
After the purchase of your home, your children's education may be one of the costliest expenses you'll ever face. In 2018, the Independent Schools Council Annual Census reported on the average boarding fees per term in the UK (collated from ISC-member senior boarding schools). The average annual cost for a senior-aged pupil was £33,000, and that figure doesn't include the extras needed for activities such as sport, music, art and the cost of uniforms and school trips. These are likely to add further thousands to the annual bill.
Make savings where you can
It's worth noting that fees vary widely from school to school and from region to region - the South West of England has the highest, followed by the South East and then Greater London, with the North West having some of the lowest fees. So if you can be flexible about location, this has the potential to save you a considerable amount.
Fees are normally payable termly in advance, although different schools may offer different payment options (including monthly Direct Debit payments).
Some schools will offer a discount if you have more than one child at the school. Of course, this must be weighed up against whether it's best for siblings to attend the same school. You may feel that your children need different schools to achieve their best.
School fee plan
School fee plans are designed to help parents and guardians pay school fees. They often come with some measure of protection for your investment and can be tailored to your individual circumstances and needs.
How a school fee plan works
School fees plans are a way to save that is usually promoted as tax-efficient, and usually offers some kind of protection. While they're intended to provide for school and university fees, the money can be used for other things if you choose.
There are three main options
Capital schemes: Investing a lump sum in a guaranteed fund usually guarantees that you'll at least get back your original investment. However not all plans will have a guarantee. The earlier you invest (when your baby is born, or even before, is best), the more chance you have of making money on the investment.
Income or regular savings schemes: You make regular monthly or annual payments to a savings scheme. Again, the earlier you start saving the more money your investment could earn.
Combined schemes: You invest a lump sum at the start of the plan and top it up with regular or irregular payments over a short term.
Things to consider before choosing your school fees plan
Are you happy with the risks of school fees planning?
Like all investments, with school fees plans there's no absolute guarantee of how much you'll get. The value of your investment can go down as well as up and you might get back less than you invested.
It might not be enough to cover the fees when the time comes to actually pay them. Make sure you're comfortable with the risks before you invest.
How much tax will you pay?
School fee plans are designed to be tax efficient, but it might not always be the case, especially if you cash in a plan early.
How much tax you might need to pay will depend on the type of plan you choose and your circumstances. Before buying your plan, talk to the provider and make sure you understand what tax you might have to pay.
Will you have to pay charges for a school fee plan?
You might have to pay initial fees, annual management charges or even a percentage of the profits, depending on the school fees plan you choose.
Not all school fees plans are regulated by the FCA. Investing in an unregulated scheme can be very risky.
Are there better investment options than school fees planning?
A school fees plan isn't the only option, and it might not be the best one. There's a wide range of different savings and investment products available, which could be suitable for school fees planning, depending on your circumstances.
Before making a decision, let us investigate the other products on the market to see if they're better suited to your needs.
Are you interested in funding your child's schooling?
Our services relate to certain investments whose prices depend on financial market fluctuations beyond our control. Investments and their income may go down and up, and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance.