Every parent wants the best possible education for their kids, but there’s a huge difference in cost between sending your kids to a government, religious or independent school.
|
Item |
Primary school |
Secondary school |
|
Tuition fees |
$9,664 | $19,556 |
| Uniform | $327 |
$475 |
| Devices | $323 | $1,172 |
| Excursions | $221 | $508 |
| Camps | $197 | $500 |
| Transport | $688 | $562 |
| Sports apparel | $282 | $369 |
| Music instruments | $453 | $306 |
| Extra tuition | $670 | $657 |
| Total | $12,825 | $24,105 |
|
Item |
Primary school |
Secondary school |
| Tuition fees | $9,664 | $19,556 |
| Uniform | $327 |
$475 |
| Devices | $323 | $1,172 |
| Excursions | $221 | $508 |
| Camps | $197 | $500 |
| Transport | $688 | $562 |
| Sports apparel | $282 | $369 |
| Music instruments | $453 | $306 |
| Extra tuition | $670 | $657 |
| Total | $12,825 | $24,105 |
It’s worth noting there can be a variance in costs between regional and metro locations. The most expensive option is to send kids to an independent school in a metropolitan area, while the least expensive option is a government school in a regional area.
When you have decided which education option is right for you and your kids, you then need to decide on ways to save up so you have enough money to support your choice.
In the short-term, put together a budget so you can work out how much you have left after you meet your everyday expenses to put aside for your kids’ education. These can be stashed in a high-interest savings account or term deposit, so you’re continuing to add to your funds while you save.
Longer term, there are a number of options to build an education fund, which can be used independently or in combination. Let’s take a look at how they work.
Investment or education bonds
Bonds are investments that allow you to lend money to a company or government with the purpose of receiving a regular and predictable rate of return. They typically require you to regularly invest a certain amount in the bond.
Bonds are tax-effective, meaning you are usually only charged a 30 percent flat tax rate when you take the money out. But you must hold the investment for at least 10 years and you can’t add more than 125 percent of the previous year’s investment to the bond.
It’s worth noting that investment bonds can be used for any purpose you wish, while education bonds must be used for education only.
Managed investments or exchange traded funds (ETF)
A managed investment is, as the name implies, a managed fund where your money is combined with that of other investors; a professional investment manager then invests on your behalf. ETFs are also managed funds, but are traded on an exchange, such as the Australian Stock Exchange.
Managed funds are more flexible than education bonds, and the return doesn’t have to be used for educational purposes if you change your mind. They are taxed at the individual’s marginal tax rate, however, unlike investment or educational bonds.
There are a wide variety of managed funds to choose from, each with their own level of risk, investing approach and returns. Consider talking to a licenced financial adviser if this is a path that interests you – they’ll be able to help you develop an investment strategy that meets your needs and risk appetite.
Extra home loan repayments
Another option for saving for your kids’ education is to make extra repayments into your home loan. With this approach, your “return” is the money you’ve saved on your interest rate – which then gives you a known rate of return.
However, in a low-interest-rate environment, the real return may be less than inflation over time, which means you may have additional costs by the time your kids are ready to go to school. You also need to be disciplined to not spend the money.
There are plenty of ways to save for your kids’ education – but you need to sit down and work out how much you need to set aside, and then be disciplined about making sure you stick to your plan. By doing so, you’ll take the stress out of affording your kids’ education.
