Education fee planning

15 March 2010

For both Dutch and expat families, the cost of a
decent education for their child can run into the
thousands, especially if they decide to go down
the private school route. If your child starts at
prep school, goes to a good private school and
then to the university, the bills can add up to a
small fortune over the years; and if you have
more than one child then it can double or treble.

Families paying for education fall into three
categories:
› wanting to supplement fees paid from income
› investing a lump sum that will provide the
income to pay fees
› looking at a regular savings plan to pay the
fees


Funding education fees. What is it and why to
consider?

Setting up a plan to fund education fees is no
different from any other investment plan, except
you need to have a robust and effective strategy
in place to maintain continuity of education. This
means looking at affordability of the education
plan you have for your child.

Few expats and nationals have the ability to
continually dip in to their income to pay
education fees. Also, not all are fortunate
enough to have this subsidised by their
employer. In addition, over such a long period as
schooling and university, life events inevitability
have an effect on income. Thus, any education
funding should have built in ‘buffer’ or cash
reserve to call on when times might be harder.

TIP: One plan for a cash buffer is looking at
international life assurance.


Matching your needs to the right savings
plan

It is important to remember that funding your
child’s education is tailored to the financial
needs of your family. To make sure you receive
the best advice, talk to a professional
independent financial advisor whose business is
regulated by the Financial Services Authority.

TIP:  Check if your advisor is allowed to choose
options from the whole of the market and is not
tied to a particular financial institution or
selection of preferred providers. You want the
best scheme at the best price and you’re
unlikely to find this from a tied advisor or
financial institution like a bank.

Schooling is a family affair

Many families club together to pay for education
fees – this may mean specialist advice about
setting up funds, trusts or foundations for
grandparents. This is a specialised financial
planning area. Trust planning rules do not make
this a beneficial solution for every family.


Investing in the future

Lots of strategies are available to fund
education. As mentioned above, paying for
schooling falls into three categories. For
instance, a family may be able to afford 60% of
the school fees out of taxed income and need a
boost from an investment to provide the extra
cash. Another family may have a lump sum
inheritance that can be invested to provide an
income that covers school fees. Others may not
have any lump sum or lack the ability to fund the
greater part of fees out of their income but can
afford to put a little away regularly over a long
period to build a larger fund.


Financial planning gives you flexibility

One of the most important points about saving to
pay for a decent education or for any other
reason is not to start a scheme and just leave it
to run itself. Tax laws change, new products
come on to the market and personal
circumstances change. These points have to be
considered regularly and your financial strategy
tweaked accordingly.


About the author
For more information or any other financial
queries you may contact Simon Parfitt at
Guardian Wealth Management.
Tel: 0031 (0) 650 971536 or email
simon.parfitt[at]gwm-intl.com