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Invest Wisely in your Child's Future.
Independent school fees have risen faster than inflation and it is estimated that it costs more than
£100,000 in Scotland in the United Kingdom to fund a child through a private education. So sending your child to a fee-paying school is a major consideration and even when you have worked out the fees, remember that there are other costs to be taken into account - in addition to the basic annual fees there will be extras that can add up to 10 per cent of the total.
Schools are very sensitive to the fact that this is a major outlay for parents and she leads to the accusation that the sector is for the rich. This upsets lots of parents. They are not rich. They don’t see themselves as being rich; they have to work very hard to get their children through education.
It has to be conceded that fees have been rising steadily over the last three years since the McCrone agreement; this has been exacerbated by steep increases in teacher’s superannuation contributions, National Insurance contributions, and a raft of regulations and, for example, the self-financing of the Scottish Qualifications Authority. But even though subject to unpredictable forces hitting them fee increases will be more modest in the next year or so.
There is no magic solution to investing for school fees. As any parent who has chosen to educate a child at a private school will know, the costs are substantial. School fees are not linked to inflation or any other recognisable index and seem to rise steeply every year. Parents now have the additional concern of funding a child’s tertiary education. However, there is a need to be wary of financial ‘products’ marketed for the specific purpose of funding school fees. Many of these are typically no more than traditional forms of investment ‘dressed up’ to attract investors who need to save to meet educational costs. It is important to investigate the cost and suitability of these products by contrasting them with simpler financial alternatives, which are available on the market.
The most appropriate form of investment is often determined by what is affordable. For the most, fees must simply be funded from income. Those with capital to invest should follow the basic, straightforward rules. Avoid risk, keep it simple and accessible.
There is no point in investing in stocks and shares in the hope of achieving growth if you have no other capital to fall back on if the market goes against you. To achieve some growth and a pre-requisite for meeting rising fees. A parent could consider National Savings products, UK government gilts or zero dividend preference shares. Zeros have had a bad press as a result of some being caught up in recent financial scandals but if chosen carefully, it should be possible to achieve some growth with each zero maturing on an annual basis to meet the cost of fees.
In addition, don’t ignore tax efficiency. For many families, capital will come from grandparents, rather than parents. If grandparents invest directly for grandchildren, perhaps in a small education trust. The income and capital gains are charged at the grandchild’s marginal rate.
This will boost the value of the funds for the family as a whole.
Consider all the options carefully and invest wisely in your children’s future.
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About the Author: Barry Hooper is an independent writer and can be contacted at - basthehoop@hotmail.com
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