As a parent, you want to give your child the best possible possible education. However, school and university fees can be costly. According to the Australian Securities & Investments Commission, only 10% of Australians save money for education purposes.
Here are 3 questions to ask yourself when saving for your children’s education.
#1 How much money will I need?
There are a number of different factors and choices that can affect how much money you will need. For example, do you want your child to go to a public or private school? For two children, this means spending an estimated $240,000 or more on school fees alone across six years. That’s not even counting school uniforms or all of those other extras that come up such as camps and excursions. Of course, public schools are significantly cheaper. However, there are still costs for textbooks, uniforms, excursions, and other extras that need to be factored in.
Your child’s tertiary education is another thing to consider. The government effectively allows tertiary students to take out a loan that they will begin to repay through their tax contributions when they pass an income threshold. The HECS and VET-FEE help schemes can alleviate the need for parents to pay however some still choose to pay university and college fees.
#2 When do I start saving?
The best time to start saving is when your child is born or even earlier, however this isn’t always an option. Like any other long-term savings plan the next best time to start is now. After you have worked out how much money you think you will need make a budget and decide how much you can put aside each week. Be sure to increase the amount each year to account for inflation.
To ensure you stick to your savings goal set up a direct debit from your account and deduct a weekly amount into education savings. This will take away the temptation to perhaps allocate the money elsewhere. You could also make lump-sum contributions with bonuses from work or your annual tax refund.
#3 What are my saving options?
Once you have worked out your budget you need to think about how to make your money work for you. Investments such as online savings accounts, managed funds and shares can be a great way to squirrel money away for your children’s education. You’ll need to consider the flexibility of the investment as some may give you a greater return but will take longer. Family trusts and Education Savings Plans could be another option for your family however you will need to seek specialist financial advice.
Starting early is key! The same goes with teaching your children good saving habits. The earlier they understand how to save money and why it is important, the better off they will be. This will put them in good stead to make their own informed financial decisions throughout their lives. It really is one of the best things you can do to help set your kids up for success.