Making private school a reality for your kids – what you need to do

March 27, 2019 Making private school a reality for your kids – what you need to do

Okay, so you have kids or are planning on starting a family and want to give them the best education possible. Great. I’m the same.

When my wife and I have children, we want to give our kids the best start in life we can, so I know where you’re coming from.

As a financial adviser, two of the most common questions I get asked is “can I afford to send my kids to a private school?” and “what do I need to do to make it happen?”.

Regardless of how old their children are, my top-level advice is always the same: having the right savings or investment strategy is everything. You really don’t want to be relying on your disposable income to fund your kids’ education – the stress would be too much.

If you’re starting at ground zero, here are five potential strategies to get you started…

Earn more money

Admittedly, most of us don’t have the luxury to wake up one day and go, ‘hey, I’m going to go out and earn more money’. If only life was that simple. That said, sometimes it can be as simple as your partner returning to part-time or full-time work after having a baby.

Regular savings

This is an obvious one and, to be fair, is often the path of least resistance for most people. Working out a budget and a long-term savings plan is a great way to start – which I can help you with, obviously. It’s a case of deep diving into your spending, cutting down expenses, working out areas where you can save, putting money away regularly and letting your savings contributions and interest compound away over time.

Insurance bonds

These are also called ‘Investment bonds’. They’re like a managed investment fund but are actually a product you purchase. Think of them as a long-term savings plan with a better return. To maximise your investment, the general rule of thumb is that you should hold an investment bond for at least 10 years, just to let the law of compounding returns work its magic. As with any strategy, how much you start with and how much you contribute on a regular basis is key.

Invest in a growth asset

I’m talking shares or property. I’ll give you an example. Let’s say you have a child who’s going to be starting high school in the next 10 years, and you’re looking at $400K+ in private school fees for high school. If you bought an investment property for $400K today – particularly with the way the market is at the moment – it’s likely the property will have gone up significantly by the time your child starts school. The other advantage is that this property will continue to generate income down the track, well beyond school.

Leverage existing capital such as your home

This is a really common way people fund their kids’ private education and essentially involves making extra payments on your home loan and paying down your mortgage quicker. In other words, it gives you more equity down the track to redraw to pay for private school fees.

 

As always, I’m around for a quick chat if you want to dive a little deeper about anything. In the meantime, if you are looking to understand investing, you can grab a copy of our investment philosophy here and we have a neat education program on buying your first investment property coming out soon, so email me if you want early access, jason@orangewealth.com.au.

 

Disclaimer: all information contained within this article is of a general nature. It does not take into consideration your personal financial circumstances. Please consult a professional financial adviser (just like us ) when making a financial decision.

Jason Chew
jason@orangewealth.com.au

I've been in the financial services industry for 10+ years and love coaching people to make the most of what they have.

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