For both Dutch and expat families in the Netherlands, the cost of a decent education for their child can run into thousands, especially if they decide to go down the private school route.
If your child starts at prep school, goes to a good international school and then to a 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 up.
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
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 internationals 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.
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 are unlikely to find this form a tied advisor or financial institution like a bank.
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.
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 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.
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.