Tuesday, July 16, 2019

school

Did you know a private school education in Australia could cost you up to half a million dollars... and that's just for one child. 

Research from the Australian Scholarship Group shows that the cost of a private school education has almost doubled in a decade, jumping from a national average of $296,000 in 2007 to $487,000 in 2017. 

Tuition rates vary depending on where you live, costing as little as a few thousand dollars per year in some areas and up to $40,000 per year in the most exclusive inner-city circles. 

So, what does this mean for parents who are hoping to send their kids to a private school? While you don't need to do anything as drastic as getting a second job to afford your child's tuition fees, you will need to plan ahead financially. Here are some options (that don't involve selling a kidney):

1. Draw equity from your home

Drawing equity from your home could give you an opportunity to fund expensive private school fees - at least initially. 

In simple terms, equity is the difference between the amount you still owe on your mortgage, and the current market value of your property. If that's a sizeable chunk of cash, you can draw on it to use it for things like home renovations, family holidays or, you guessed it, private school fees. 

To find out whether this is an option for you or not, your first step is to meet with a mortgage broker to assess your financial situation. They will match you with a lender and arrange a property valuation, which will give you a guide of how much equity you have in your property. From there you can make the decision as to how much you want to access through a refinance, which may reapportion your home loan over a fresh 30-year term. 

You may also utilise the option of an offset account, whereby your savings/equity is stashed in an offset account attached to your mortgage. This is a highly effective method of paying school fees, as you'll be able to reduce your interest payments and pay off your loan faster, while still having access to funds. 

2. Save in a bond

Another great way of saving for your child's education is by putting money aside in a school bond, also known as an education savings fund or scholarship plan.

This type of saving is an older-style investment choice, but is a useful incentive to parents trying to save. You can start a school bond with as little as $1,000 and invest small amounts into it regularly. If you open one when your child is still young, you could potentially have a sizeable nest egg for schooling by the time they come of age, especially if they don't enrol in private education until high school. 

Note that if these bonds are held for a period of over 10 years, they're capital-gains-tax-free, and they also hold tax concessions if they're used for educational purposes, so there are tax benefits all round. 

3. Invest in a property

When your child is young (or ideally, before they're even conceived!), investing in a property to fund their future school fees could pay dividends. 

Consider Sydney's property market. If you bought a property in Sydney 5-7years ago, you have likely enjoyed a six-figure price growth - more than enough to fund the first few years of school fees. Investing in Sydney today isn't going to generate the same short-term capital growth, but there are other markets to invest in and/or property investing strategies to follow (such as renovating to add value or getting involved in a development), which could boost your bank balance substantially. 

You don't have to dread the school years. No matter how you decide to approach it, there are plenty of options to help you navigate going forward. As long as you have a solid savings strategy in place and the mindset to stick to it, you can earn and save enough to make these years a breeze, for your wallet, at least!

 

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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