5 Ways to Fund Your Private School Fees
One in three parents with kids at school will feel a collective pain this month when their next private school fee bill arrives for payment.
With so many Australian parents now choosing to invest in a private education for their children more and more are asking the question: how to pay for school fees?
We took a look at the top 5 options:
1. Save in a mortgage offset account
Many mortgage facilities have a 100% offset account attached. Any savings you have set aside in the offset account is used to reduce the mortgage balance on which interest is calculated. Therefore, your offset savings will be earning a “return” equal to your mortgage interest rate.
2. Join an education fund or buy an investment bond
Education funds and investment bonds are structured savings and investment products that allow you to make regular contributions with proceeds to be drawn down to fund education fees at a later time. While these funds can provide discipline, structure and tax advantages, expensive management fees and withdrawal restrictions can limit their effectiveness.
3. DIY savings and investments
Self-directed investors may prefer to make their own savings and investment decisions which could include everything from a share portfolio to an investment property or a mix of several. Do-it-yourself investments offer much more flexibility and potentially a better investment return, but they need strong discipline and commitment over time to work effectively.
What if you have fees to pay now, rather than saving for the future?
4. Mortgage redraw
Those with a mortgage could redraw against their loan to free up additional cash for school fees. Just be aware that if a mortgage redraw is paid back over a long term (say 15+ years) the total interest cost can become very significant, even if the loan has low interest rate.
5. Edstart payment plans
Families who prefer not to touch their mortgage, or don’t have the capacity to do so can access customised payment plans with Edstart. These loan facilities are unsecured and designed to spread out the cost of fees to match your budget. For example, 6 years of high school could be paid over a 10 or 12 year period.
Jack Stevens is the Founder & CEO of Edstart – a new financing solution for education fees based in Sydney, Australia.