School fees at elite private schools could easily cost $25,000 a year or more, but it is not just parents looking at private schools who need to plan ahead, he says.
“Even if private school isn’t part of your education planning, other independent schools can still cost thousands of dollars. Textbooks, computers, excursions, camps, uniforms, equipment and extra-curricular activities are all additional expenses, and can create a large hole in the family budget.
“What often gets missed is that even with low overall inflation, education costs have run at more than the CPI for some 15 years. For the 12 months ended December 2013 the trend worsened, and education costs rose by 5.6 per cent compared to the 2.6 per cent rise in the CPI*, he says.
“Some parents take control and look ahead to the costs of education, years before the costs will be incurred, which goes a long way to alleviating the financial pain, Mr Walsh says.
“Knowing roughly how much your education choices are likely to cost, and thinking about what you will need to do to meet those costs is an important part of the planning process.
“Once you have an idea of the costs, you can then calculate how much can be paid out of normal income, and how much will need to be paid from savings.
“It also makes sense to look for a savings vehicle that will be tax effective in nature, and that also ensures the funds you put aside for education can be effectively managed for this purpose.
“Education savings plans, offered by friendly societies, are a good vehicle for those who have a time frame of 10 years or more. Parents should look for options that allow investment in growth assets and that are appropriate for a long term time frame.”
Education savings bonds include tax breaks that help boost earnings. They allow a special tax refund on education expenses claimed from earnings from the fund, which is passed on to the investor and student.
“The Lifeplan Education Investment Fund also gives people a choice of investments within the plan, so they can select growth assets or, if they prefer, a conservative investment option.”
Mr Walsh says parents shouldn’t put education savings in the too hard basket, or believe they have left their education savings run too late.
“The key is to act now; in whatever capacity you can, and enjoy the benefits of education savings plans, including tax incentives, for the longest period possible. Even a small amount contributed regularly can make a difference,” Mr Walsh concludes.
For more information please contact:
Head of Lifeplan
Phone: 08 8236 4706