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Pain-free private school fees

I’ve been staggered by what private school fees can cost and wonder, as my young daughter is now two, if there’s a plan I could look at to make the final day of reckoning easier to cope with?

There are education plans, which will be a monthly contribution. These have had mixed reactions from the financial community, but should be looked at on their respective merits. On the other hand, some people have created an investment fund to cover the future expenses.

Let’s say you wake up to the cost of fees when your child is two and she’ll start high school at 12. You have 10 years to get the money together.

The goal is to create an investment plan with a margin loan connected to it. You can use your family allowance payments and throw in some of your own money. The interest will be tax deductible, which is a help, and although you end up with a debt, it is way below what the fund builds up to over the time your child grows up and completes high school.

I’ve seen figures which means putting in $500 a month through the family allowance and a loan that grows an investment to $100,000 before the child starts high school, with a tax deductible debt of $42,000. The investment fund was assumed to earn a conservative nine per cent. After six years of fees of $8000 a year, there was still $60,000 left after the fees were paid and the loan was repaid!

This is how financial planning can be useful in planning for a big spend in the future.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

 

Published on: Monday, January 25, 2010

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