Ten years ago, one of our Portfolio Managers asked me to join him for a celebration drink after work. “What are we celebrating?” I asked. He explained he’d just finished paying the last instalment of his children’s university fees. As it turned out, he had actually been paying both private school fees and university fees for his two children for just over ten years.
I didn’t really appreciate at the time why he was so elated… until some years later when I started paying for school fees myself!
All parents want to give their children the best possible start in life, and a good education is one of the best investments you can make for them. A good education can help them to start along their chosen path in life! In China for example, it is not uncommon for a child’s extended family to all make financial contributions to his or her private school education.
Typically, about 80% of parents pay school fees direct from income. In reality most parents don’t plan ahead early enough.
If, say, an annual school fee ranged from $15,000 per child per year as a day student or $40,000 per child per year as a boarding student, over ten years that is going to cost anywhere from $150,000 to $450,000 per child! Add three years of university fees on top of that at, say, $50,000 a year and you are now looking at a total education bill over 13 years of $300,000 or $600,000. Schooling two children privately will, therefore, cost you between $600,000 and $1.2 million (and these figures do not take inflation into account!)
The most efficient way to meet these costs is to start a school fees plan as early as possible. Over ten years, a monthly saving of, say, $2,000 a month with an average annual growth rate of 6.00% per annum will give you $327,000 in total. $4,000 per month will give you $655,000 over the same time period.
These monthly savings may not cover the whole cost of your children’s school fees, but they will go some way in helping you meet this significant financial commitment.
If you are planning to school your child privately, you need to plan ahead because for many people the financial burden will be too great to bear.