Monday, 20 September 2010

Regular Saving for School Fees

I have previously looked at investing lump sums for school fees and how this can potentially save you a significant amount of money over the long term. Many parents do not have hundreds of thousands of pounds sitting around simply waiting to be spent on school fees.

More often than not one of the parent's wages will be directed entirely towards school fees, if not from outset then almost certainly by the time their children are reaching the end of senior school.

With school fees easily able to touch £250,000 per child it is easy enough to understand why a massive amount of a families disposable income is taking up just paying school fees.

You will always hear from me that the best approach is always to start saving as early as possible, getting into the habit of saving can never be a bad thing whether it is school fees related or not.

So if we are to assume that you have only one child and average school fees which include the cost of University (£250,000). If you were to start saving when your child was one year old then in order to cover the fees, assuming a long term growth rate of 5.2% then you would need just over £600 per month.

Please remember that growth rates are used purely as an example are in no way a projection or promise you could get back a return of more or less than the amount I have used. In order to achieve possible greater returns you have to be willing to accept potentially greater risk to the short term value of your investments. The two go hand in hand and while many people assume otherwise this can almost never be avoided.

Over the term of your child's education the total cost of investment is over £144,000. If you compare that to the lump sum investment required for the same level of fees it is some £20,000 more. While in the grander scheme of things this is relatively little, the more money you have to start with the better. Equally the more you can save at the beginning the better the compounding effects of growth can positively impact your investment balance.

Hopefully that gives you some idea of the level of commitment required to put your child through private education and University.