Managing your children's education costs
Superannuation | 12/01/2017 |
3 min read
A quality education is a lifelong resource and a powerful launching pad for young Australians. But with education costs rising at more than twice the rate of inflation, it’s important to plan ahead, and think about how you’re going to finance future schooling.
The actual cost of your child’s (or grandchild’s) education will depend largely on whether they are enrolled in a public or independent private school.
A survey conducted by the Australian Scholarship Group (ASG) provides a snapshot of average costs across metropolitan and regional areas in Australia.
Higher education and all the extras
Of course, fees aren’t the only cost you need to budget for. Many public schools ask for ‘voluntary contributions’ in lieu of the fees that most public schools ask for.
There are also traditional outgoings for uniforms, books, laptops and extracurricular activities. ASG estimated that in 2016 families were spending an average of $1000-$3000 on these ‘extras’ per child every year. It was also found that these costs increased as the student aged, whether they were private or publicly schooled.
And let’s not forget the cost of higher education. An undergraduate degree currently costs between $6000 and $10000 each academic year, depending on the course chosen.iv Most students choose to defer payment via a HECS-HELP loan, but many families would like to help their children or grandchildren pay some or all their fees upfront to avoid a large student debt.
Where students live away from home, parents may also need to factor in the cost of student accommodation and other living expenses.
All of this adds up, and grandparents are playing an increased role in meeting education costs. According to Rest’s The Journey Begins report, 29% of grandparents draw down on their super to pay school fees. This can be done in the grandparent’s name or the child’s name, depending on your individual circumstances.
Explore your savings options
Like any major investment, the sooner you start saving the more options you will have. You could open a dedicated savings account, but the interest rate is unlikely to keep pace with inflation. Here are some popular strategies for long-term education savings:
- Education funds. These are specifically designed to lock money away for your child’s education. They offer some attractive tax concessions, but there are restrictions and fees to consider.
- Term deposits. These are simple and low risk, but interest rates may not keep pace with inflation.
- Managed funds. You don’t need much money to get started, you can make regular contributions and you get the benefits of diversification and professional management. However these products usally carry the risk of negative returns in some years.
- Insurance bonds. Like a managed fund, these offer a diversified investment menu but with additional tax advantages. Earnings are taxed inside the bond at the company rate, which may be less than your marginal rate. If you withdraw your money after 10 years, all investment earnings are tax free.
Investing in a child’s education is a long-term commitment, and while the right school can make a difference, a lifelong approach to learning starts in the home. Speak to an Equip financial planner to find out more about your options when it comes to savings, superannuation, and educational costs.
This article is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Before making a decision to invest in the Equipsuper Superannuation Fund, you should read the appropriate Equip Product Disclosure Statement (PDS).