School Fees - The Cost of Education

With school back this week, it was timely the Australian Scholarship Group (ASG) released their Planning for Education Index.

Before we get into it, the long standing question must be answered - "Can you place a cost on education?". Sir Claus Moser answered this well - "Education costs money, but then so does ignorance".

The ASG Planning for Education Index has an important word in the title - Planning.

Too many times, I hear of people paying fees from their mortgage equity (at 4% p.a. interest), or worst still, maxing their credit cards for last minute payments (at 20% p.a. interest).

Why? Because they fail to plan.

Which would you rather pay for top private high school fees, after tax:

1. $40,000 p.a. average, payable at the time; OR
2. $376 per week average, starting from birth of your child

The latter is not so daunting. Yet, it is still after tax, so the true cost can often be one spouse's gross wage. Based on the current Reverse Bank of Australia stats, households have limited disposal income, and even more limited savings. So room to move is hard.

Further, please don't think Government education is totally free.

The benefits of compound savings are known, yet the cost of delaying is often forgotten. 

Like any average figure – it’s an average. Metro and regional will differ. So bear this in mind.

ASG have been rather detailed in their calculations, with a breakdown of costs for the "type" of education you desire, being Government, Catholic or Independent. The below is an estimated cost by ASG for 2019:

But for those that wish to plan from day one, ASG have provided a full guide for children born in 2019, to year 12:

The above is key.

If I analyse this further, the respective weekly cost for Government, Catholic and Independent, is only $84, $158 and $376:

Warning, my calculations started from 1st January, so you are already one month behind. And this is based on child only.

This excludes any interest, which in today's environment, is not far from the truth.

With appropriate portfolio advice, one may obtain additional earnings to alleviate the pressure of the weekly capital injections.

Further, education bonds are a great way to minimise tax over the full schooling period.

Financial advisers play a tremendous role in designing the above strategies, so it is worth seeking advice early. Especially since a couple may be down to one income post birth, or worse, experience complications that require costly, ongoing medical expenses.

The positive - it may be as easy as setting up a regular payment plan within your budget. If you don't see it, you won't spend it.

This link may help: https://www.asg.com.au/calculator/cost-of-education-calculator

And if all else fails, talk to the grandparents. They are having trouble getting money into super these days, so strike whilst the legislation is hot.