School fees are rising faster than the rate of inflation, creating financial challenges for parents.
Private school fees rose by 3.7% this year, according to the Independent Schools Council, with the average independent day school charging £14,289 a year in 2018. But inflation, as measured by the consumer price index, was only 2.1% for April 2019.
How can parents fund rising fees? Some may be able to meet costs out of earnings, but many parents will need to build reserves. When planning to accumulate a school fees fund:
- Plan ahead: The sooner you start, the better chance you have of building a decent nest egg by whatever age your children will enter the private system.
- Make the most of tax-breaks: ISAs allow each parent to save up to £20,000 a year, tax free. Equity ISAs may be suitable for those with a 10-year plus savings horizon, otherwise better to stick with cash.
- Get family involved: If relatives make regular payments they can potentially reduce their inheritance tax liability and one-off payments would normally be disregarded providing the
donor survives a further seven years.
- Ask about bursaries and scholarships: The number of pupils being helped by these schemes has risen by 3% over the past year.
- Remember insurance: income protection insurance, for example, could cover the fees if you were too ill to work.
Of course these savings tips can also help meet future higher education costs.
The value of your investments and the income from them can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
The FCA does not regulate tax advice. Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances.
Tax laws can change.