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Saving for your children’s education: What are your options?

Updated: Oct 23, 2020



All parents know school and university fees can be expensive. Most people saving for a child’s education don’t know exactly how much they will need, or the direction a child’s future will take. Our wealth management team can help you navigate these changes and direct your money in the right investments.


Let’s look at some options.


How much is it going to cost me?

Estimate how much you'll need based on how old your kids are, whether you want to send them to private or government schools, and whether you're saving for their primary, secondary or tertiary education – or all three. Primary schooling will cost less than secondary and tertiary schooling.


Start saving early

The best time to start saving is when your child is born or even earlier. If that's not an option, then like any other long-term savings goal – the best time to start is now. Make a budget and decide how much you can put aside each week. Increase the amount each year to account for inflation.


There are a few ways you can achieve your savings goal. It could be as simple as setting up a direct debit from your account and deducting a weekly amount into education savings. You could also make lump-sum contributions, such as your annual tax refund.


Ways to save for education

The key factors to look at when selecting your savings strategy are:

  • Performance

  • Risk

  • Tax implications

The options on offer will depend on your situation, but these are the main ones to consider.


Mortgage

Paying off your mortgage as quickly as possible saves you interest and frees up your cash. Make sure your mortgage has a redraw facility with low or no fees, or an offset account, so that you have access to the money if you need to draw on it for education expenses.


Insurance bonds

Insurance bonds work like a managed fund and are available from a range of financial institutions allowing a range of investment strategies.


Education savings plans

Education savings plans (ESPs), which offer a tax-free investment for education, sound like a good idea, but it's critical to find out what kind of leverage these have over your money.


Family trust

A family trust may be a good option if you have a large sum of money available. Although you'll need specialist financial advice and there are administration costs, a family trust can help you to legitimately distribute investment income and take advantage of lower marginal tax rates for certain members of the family.


Savings accounts, funds and shares

Investments such as online savings accounts, managed funds and shares can be a way to set money aside for your children's education. However, consider the flexibility of the investment: online savings accounts are readily accessible, but you'd want a long-term investment timeframe for an investment in managed funds or shares. As you begin to approach the time you'll need access to the funds, consider moving the money into a more accessible investment.


Get in touch using the link below to learn how we can help you plan for your children’s education. https://meetings.hubspot.com/blueoceanwealthmanagement

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