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Saving for your children’s education is a major expense and one that is not for the faint hearted! It is getting worse, despite government subsidies, school fees are soaring with reported fee increases well above inflation, between 5% and 10% this year from some of the well known schools in Sydney and Melbourne. It is not just the rising cost of school fees, it is also all the additional extras and then College fees. University costs are spiralling also with Australia having one of the most expensive University systems in the world (read more about that here from Stephen Long). We all want to help our kids and ideally don’t want them to just live off baked beans for three years at Uni! I have put down some key tips that might help and don’t forget, plan ahead: the sooner you get an education nest egg started, the better the return.

How much do I need?

• Work out what your costs are. A great tool is AMP’s Education Calculator. It allows you to understand your goals and expected costs and estimate a regular savings sum to plan for.

How much are the fees?

• Saving for education requires a conservative investment strategy and many investment options of this type carry high fees. Check out all the costs associated with any investment strategy you are considering.
• Many funds you may consider do carry a tax levy on returns. Look at the Tax implications and get advice from your accountant. So ....
• Consider the wisest tax efficient method of saving balanced against a low fee or no fees investment product

What products?

• Specific scholarship plans, such as Lifeplan and The Australian Scholarship Plan are available
• Managed Funds offer a diversified fund of investments in fixed interest, cash, property and shares, and you can spread your risk and take advantage of long-term growth investments. Our Investor Profile tool will be useful for you to work out your strategy, and there is more information if you are new to Managed Funds here. You have some flexibility with the Managed Funds product if you need to access the savings immediately for some reason.
• Another option is to consider diversified investments across Term Deposits, HISA’s and Managed Funds, giving you flexibility to get to your money if you need to, while having some of the money in higher return products for the longer term.
• Some schools offer their own payment plans, such as pre-paying which provides a way to pay in advance and get a discount / protection of escalating fee costs.
• Flexible mortgages can offer a redraw facility; the downside is most of us like to see our balance going down not up! However, if you have equity, redrawing from the equity and placing the capital in diversified investment products or a managed fund might be a consideration for you.

Don’t forget:

1. Your goal;
2. You need your money to grow to meet the rising cost of education;
3. The sooner you start saving, the longer time frame you have to take advantage of better return investments that maybe slightly riskier;
4. The sooner you need the money, the less risk you can afford and the more conservative your investment choices.