Is this a financial mistake? Help please

[Subjk]

I have a 2 year old and have recently been gifted 80k. If I paid off some of my mortgage with this I would owe 150k. I’m 35.

The schools round here are absolutely awful. I can’t move area as I need family support so I have to stay.

Yesterday I looked round a private school which is 20k a year including vat. Me and ex are on good terms and he pays 1,200 a month. He won’t pay school fees but has said he will increase monthly payments to 1,500 if I choose private.

What would you do? I don’t have a high income my take home is 2,400. I am worried for dd and feel a bit lost with what to do. Please help!

I don't think you can predict the cost of school fees for the next 18 years, or the relative value of private v state schools. I wouldn't go there myself.
Paying off a big chunk of your mortgage now will never lose its value and your reduced monthly bills will enable you to consider how you can best support your DC's education.

Don't spend it on private school fees. "State til 8" is a saying in private school circles. If you were considering it at all, save it for secondary.

I think it's worth opening it up to some "unthinkable" suggestions. Visit the schools. A poor reputation can hang about for years after a school has been transformed. Consider going a bit further than ideal for family - is there a compromise place that is workable? What family support do you rely on exactly - could this be fully or partly substituted by paid support? Could your work hours change or someone stay over? How would someone who didn't have your family help get round it? £80k would stretch a lot further on a mother's help and some wraparound than a private infant school.

Start going to the nearest catholic church. Their schools are good. Great morals. It will save you money for private education

Personally I’d throw 75% of it at the mortgage (if your mortgage allows it) and invest the rest.

Suggest to get some professional advise, there are some great ideas on this thread and some financially illiterate. Using the ISA annual allowance on a mixture of savings and stocks and shares is a good area to look at. Picking the correct ISA is also tricky and you need to understand the risks, for you probably lower risk so tracker funds are good, however you also need to be prepared that you could lose money. You can also pay down some of the mortgage but you need to asses and weigh up the mortgage rate vs expected return on Investments. Primary private schools I think are less valuable than secondary, my husband and I plan to send kids to secondary private school if we can afford when the time comes but we won’t bother with primary.

At primary level I wouldn't worry about private school. If you can't keep it up until at least 16 what would be the point? anything canchange in your circumstances or your ex's ability to pay the fees and it would be such a shame to have to pull your child out of a school where they were happy and stick them in anywhere that can accommodate them at short notice, which isn't going to be anywhere you'd really want them to go.

I'd focus on finding a decent school and moving house if you have to. As your child is only 2 you could rent your house out and rent a house yourself in the catchment of a school you like but a doable distance from your own house. Then after a year or two, move back to your own house.

Consider putting some of it into a pension, but would also suggest speaking to a financial adviser as you can get tax advantages depending on how you invest it into a pension.

Work it out very carefully, most schools take a deposit and then monthly payments. If you think you can afford it without being too hard up, ie you won't have to go without too much, do it.

Make sure the school has good results, prepares children for grammar school places or scholarships when they are eleven. I'd do it in your position. If your son doesn't like it or it doesn't suit him for whatever reason, he doesn't have to stay there.

This looks very unaffordable in the current situation as it is. You also need to consider changes in circumstances. Do you and your ex have life insurance that would pay out to each other in the case of your death that could continue covering fees? It's stuff like that you would have to think about.

Definitely wouldn't use it on private school.

Reduce the term on your mortgage, not the monthly payments. So you get rid of it quicker and ultimately pay less interest

The worst option of all posed is putting the money into private school, especially primary private.

The other options are more dependent on things like what your mortgage interest rate is, how much financial risk you want to take, and when you want to be able to have access to the money.

It's personal preference. Paying down your mortgage will help with long term interest spent, but you can't get that money back if you need it for something else, and it doesn't help your DC directly if that's the main goal. There's no point putting into an investment unless you're happy to leave it for at least 5 years. An ISA is going to net you very little extra in the long run when you factor in inflation, but could be a good short term option if it pays you more interest than you're paying on your mortgage.

I wouldn't go private but I'd fund a tutor for DC twice a week and more in school holidays.

I’d put some towards the mortgage and then ask your ex to put the £300 into a stocks and shares ISA (and match it, so £600 a month). We do this for ours on a tracker fund and the returns have been massive. You’d be better paying for secondary if you’re going to go private rather than sending her for primary and running out of cash.

As others have said, the 80k won't last long if you start paying from nursey/pre-prep.

The fees you quote are 20k per year, but for which years? At most schools fees go up every couple of years until you reach Year 9 when they stabilise. From experience with my own kids, I would also say you can expect extras from school to add 5%-10% to these fees, and that is before you have paid for uniform, sports kit, the school trip to France which is not optional but has to be paid for etc.

An alternative you could explore is to pay down the mortgage, but then each month put the difference in your mortgage repayment into a savings account, which should mean you earn a return equivalent to your mortgage rate (5%?) rather than your bank account rate (0.1%?). Also save anything else you can, and when your chold is in Year 7, see if you have enough to pay for private school for three years from Year 9 to Year 11. That could be manageable. There are loads of good state sixth form colleges for A levels so you don't need to pay for Year 12 and 13.

£20,000 into an ISA now before April 2025.
£20,000 into an ISA from 6 April 2025.

You can also invest in a junior ISA for your DD but the money is untouchable until she's 18 and would be hers alone. If you have more children this might seem unfair to them.

Pay 10% off your mortgage capital this year (any more and you are liable for fees).

Put the rest in Premium Bonds before the end of January. They must be in the bonds for a full calendar month before you can win any prizes. You will be eligible for prizes in the March draw. Reinvest the winnings.

All of the above is tax free.

Wouldn't it be easier to buy tutors in rather than do private school.

The influence of parents is so important to primary education.

Do her reading practice every day. Do her maths homework with her, practice number bonds or whatever they are doing.

Read books about 'topics' they are doing and where possible go on outings - stately homes, historical events, galleries, theatre shows as weekend fun trips.

When she is a bout 7 use any extra money you have to support any new interests like learning a musical instrument or dance classes.

Chat about things you do together - casually talk about self raising flour makes cakes rise because the bicarb makes little bubbles when it get wet (?), eggs are protein, how butter is made etc. All part of chatty fun.

All this builds enrichment and a good education.

You don't need private education.

By the time she is secondary age you will not need to rely on family so much, you might have more savings, you will have built more equity so could look around at secondary options.

I think you should speak to a financial advisor first.
Personally I think opting for private school would be a huge risk.
Fees will continue to rise and the smaller, less expensive schools are already closing.
Your ex's circumstances might change and you could be forced to take your child out of the school she is settled in, with no decent option locally.
This is only my opinion, but I would be doing everything I possibly could to move to a better area, with better schools, even if it meant downsizing.

i don’t know if someone has already mentioned this , but going to a private school is not only about fees. They will have school trips , clothes etc as they grow into teenage years. Your child Will be growing up some very wealthy people and you won’t be able to keep up. You’re child might not have the same lifestyle as per friends at school

Can you live comfortably on your 2,400 per month, as you are right now?
Does this include the amount your ex pays?
1,500 per month would be 18,000 per year - are you proposing that you use that to pay for private school fees?
What is the cost of moving to a better area compared to private school fees?

Many years ago, I remember having this discussion with a friend - she reckoned she could move into catchment of the best school in the town for 250,000 or she could pay 18,000 per year for 13 years private school ... it is challenging to put a value on better schooling... versus property... and it depends on your values..
You won't always need as much support as you do now, when she is very young / small... you could move later, when she can get a bus to granny's house after school... the nursery years are expensive for childcare and the primary years are challenging from a logistics perspective - private school might solve some of that complexity on a day to day basis but you would have longer holidays to cover...
Paying 80,000 off your mortgage would reduce your immediate outgoings and save you interest on that amount in the long term - how would that compare to investing that money now - a chat with a financial advisor might help - bearing in mind it is in their interest to sell you products, even if you don't pay for it directly, they may get referral fees.

Take time to make this decision.... and doing 'nothing' for now, might be an option - to see how you feel in a few years time.

If you were to decide that your ex would pay for school fees - you might want to think about getting a written agreement about that - not that it could be enforced in any way beyond CMS, but it might focus his mind.. eg I commit to contributing 80% of the cost of school fees for years R to 13, including any increase in fees. Subjk agrees to meet all other costs of housing, schooling and day to day expenses.

I’d part pay off the mortgage by £50k and save the extra money and any savings from the reduced mortgage payments. Use this money to support your DC’s extra-curricular activities in the future as well as private tuition if needed. It gives you extra financial security - you don’t know at this stage what your DC’s needs are likely to be.

Unless OP is on a high interest rate, a mortgage is one of the lowest loans you can get. You could invest the full 80k in, say, Marcus account at GS and get 4.3% easy access, or put some into a fixed term for a bit more. If the interest received on savings is more than the mortgage, it makes no sense to pay off the mortgage.

Mortgages can be ported, or increased. Once paid off, and if interest rates go up, OP would find it more expensive to borrow more money should she need to.

OP has been given good advice above. Either move to an area with better state schools, if local schools really are that bad, or invest in ISAs and selection of accounts if you want to spread the risk.

You could also invest for your DD future, with an ISA, or a SIPP (v long term thinking!). Investing the max of 2.8k pa will get topped up to 3.6 by the government. DS has had a SIPP since birth and it’s already worth more than my own pension pot!

Proviso: I worked in FS and so have industry knowledge. No one here can give you qualified investment advice.

Have a think through the numbers to see if you can afford it. 80k is only 4 years of fees plus the fees rise as they get older. Do you need the maintenance fees to live off?

80k isn't enough. Would be a massive mistake OP