My eldest child is in Grade 5. We really want to send her to a private school, but we earn $150K between us. We have a mortgage that we pay around $5,000 per month on. Are we right in thinking we can still afford to send our child to private school?
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The desire to support and educate a child is a high priority for many parents and while the costs can be significant, it really comes down to priorities.
There are a number of investment and savings strategies that parents can utilise in preparation for a child’s education. Obviously the earlier you start the easier it is to accumulate the necessary savings to meet private schooling expenses. Private school fees can vary significantly, with the NSW average being around $22,000 pa (source: AFR 20/1/16).
In simple terms, a regular savings strategy into a suitable structure/product, depending on individual circumstances, can achieve the best outcome.
Options can include Investments in a child’s name (usually for small savings due to tax implications), an Education Savings Fund, Insurance bond, offset accounts and depending on a parent’s age -Superannuation (if access is likely to be available when funds are required).
Given that your child is in grade 5, I’m assuming you’re keen to get them to private school either now or in the near future, (high school).
If you assume $2,000 per month is needed, it comes down to looking at budgets. With little time to save or invest, managing the extra expense out of cash flow will be your challenge.
My suggestion is to review expenses: entertainment /lifestyle, mobile phone/ internet/ pay TV, - are they worth giving up to fund your child’s education? Other expenses such as health and personal insurances can they be reviewed and potentially restructured? Can your superannuation or employer pay some directly?
Once you have been through the household budget, you can then look at the mortgage and redraw options. Can your personal mortgage be reviewed and/or repackaged to free up extra funds while the fees are being paid?
Another strategy to achieve some immediate savings in the future is to request your employer to increase the tax you pay - even $20-$30 a week - will result in the potential for a larger tax refund each year and if increased over a few years can provide a significant refund to support school fees.
A strategy using a combination of the above should get your child to private school. The simple strategy is to get that little bit extra out of your budget in a few different ways to get the funds needed.
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