Private School fees - how do you manage?

[Moneymoneymoneyitssofunny]

Considering private option for DCs (in next few years) but just curious as to how people manage their finances to ensure that school fees are paid for duration of schooling. Paying out of earned income alone seems risky to me in case of unexpected redundancy etc but we have no source of help from grandparents or other, just modest savings, so tell me - what do other MNers do? Remortgage property?save up in advance? have other source of finance such as family members to help? Use specialist financial planners who deal with school fee planning? I'd be interested to get some advice/ideas.

A few years ago DP invested a large sum of money for each DC that had a massive tax break attached (in France) providing the monies invested were used either for educational purposes or left until the DC were 18. He impressed upon the DC that this money would be used to fund their HE (no buying a Ferrari on their 18th birthday...).

In reality, quite a lot if their education is funded from current income (and there are some tax breaks available for this too) so we juggle quite a bit (a) to optimise (b) to ensure the DC start their adult life debt free and with plenty of cash for a deposit on a first home. Grandparents also add to the pot from time to time and my perspective is that if parents and DC are very prudent and transparent about funding education, GPs find that attractive and want to contribute!

A friend told me that she and her DH had been paying school fees from equity in their house, when he lost his job and could only find something else on lower pay.

They have gone from owning their house outright to having a mortgage. She is fifty and he is sixty!

Owning a large property and using the equity in it for other purchases isn't necessarily poor long term financial planning though.

It all rather depends on how much complexity you feel able to engage in.

We saw a financial advisor. Best thing we did. Not rich family - grandparents were council tenants all their lives and parents were clerks/secretaries so we're the first generation to do this.

Given our ages and careers, we were advised to remortgage the house, invest the proceeds in ISAs up to the limit, and then the balance in a unit trust. We ought to be moving stuff back into the ISAs to keep it tax-free but since the reshuffle on advisor fees that the govt brought in, we'd actually get clobbered more in the upfront fees than tax on interest from the investments so we're leaving it where it is until we have to start withdrawing the capital (and will thus have to pay the Advisor fees anyway).

Meanwhile we're paying school fees out of earned income as long as we can, then we'll at some point switch to paying from the investment capital. At the same time we've a part-repay part-interest only mortgage with offset account which is currently costing us 2.75% while the wrap and ISAs are earning us 7%. So we're winning, and trying to get as much in the offset as we can before interest rates rise. It doesn't earn interest but for every £ in the offset we pay no interest on a £ in the mortgage.

They also sorted us out life insurance (massive, to cover mortgage and all fees/uni in case of one of us dies) and told DH to shove any spare £ he earns into his pension as the tax-free lump sum is what should be there to pay off the interest-only part of the mortgage in 10 years. Complex, but if we were just doing it out of earned income it wouldn't be secure if one of us had to stop working and we also gain because of the more efficient use of tax allowances etc.

This is certainly an interesting thread. The message is you need capital and/or income of a kind that bears no relation to ordinary professional salaries, eg includes bonuses and pay rises that keep up with fee hikes. Basically you have to be privileged.

Paid out of income (2 FT well paid jobs and yes it's still a big hit) but we have enough savings to cover fees to 18 if something happened. We have life/critical illness insurance for both of us, but no redundancy insurance as it appears not to be worth the paper it is written on in most cases.

We pay fees out of income. Our jobs are very stable and secure, with redundancy being extremely unlikely, and we do have life/critical illness insurance. If something else suddenly happened we could take a mortgage (we have none) or use savings for a year or two until we moved them to state schools but it is not something we have given a great deal of thought to. The worst case scenario, i.e. they move to state schools, would not worry us that much.

I would be surprised if the majority of parents at private schools had fees up to 18 stashed away rather than paying out of current income.

We can cover the fees with one income and that is what we currently do. As a back up we have savings that would cover a year's fees and an unmortgaged rental property in London which we could release equity from if a crisis occurred.

DS1 will go at 7 and DS2 will join him in time, I'll go back to work to fund this from salary. We have enough equity in out house to fund fees if we have to, and 'saving' into mortgage as much as we can as that is where your money works the hardest in tems of interest saved.

Friends have paid several years upfront, negotiated a very good discount in doing so, put the entire amount on mortgage and is paying it off that way (much lower interest rate on additional funding through mortgage than through any other loan).

Other friend pay full fees upfront at beginning of academic year, get discount for doing so. Pay with cashback credit card, transfer to 0%cc, divide amount/12 and pay monthly. Discount off fees+cashback card - blance transfer fee still a saving and essentially a 0% loan. This is how we fund big holidays, works well.

Do people find it a real pinch? And how how how do you have savings and no mortgage, big salaries? Living in areas with more reasonable living cost?

DH has a good salary and I have an ok one. We live in central ish London though and put everything we had recently into buying a house (which isn't even our 'forever' house) and mortgage is basically 70% of DH income (I am on Mat leave). By the time DC in secondary salaries will be better but I still don't see how we will have enough and still have a reasonable life (I mean tjings like occasional meals out rather than holidays, cars etc)

We pay from earned income, however, we do have a property we could mortgage if necessary.
We have friends who have done just that, but on their primary property. They have good final salary pensions and will use some of the lump sum to repay the mortgage. That would also be an option for us.
We also have critical illness cover and death in service benefits.
Luckily we only have one more year after this one though - we're now paying for one what we were paying for three ten years ago.
It's a massive financial commitment and really should be considered really carefully, especially if you have no back up plans for funding. The increases in fees each year is considerable.

I am old enough that we could buy property before London prices became insane that makes a huge difference now, in addition to the rental, we have a 4 bed house with a mortgage that is less that 25% of my net salary.

DH and I both bought a flat in central London in 1992.

When we moved in together we rented out one of the flats.

It was doable then on one starting salary (though with 100% mortgage).

Purely by income here, On the home straight now with one last one in private school, then we can breathe a sigh of relief!!

We have two at prep school since 4 (now year 3 and year 5) and pay out of monthly income. We don't think any further ahead than the next year but we wouldn't move them unless we absolutely had to. That shouldn't be necessary since the house is worth more than three times our current mortgage.

Since DS1 has been at the school, children have dropped out every year for financial reasons.

Hmm I think private may well be out of our reach. BUT very interested those of you who say you're thinking about private for primary but not secondary. Why is that? I would have thought that the secondary education would be more important and if you were only to do one that would be the one?

Sorry slight hijack there!!!

In some areas there is selective stats secondary education (grammar schools) and parents invest in private prep in order to maximise chances of a grammar school place.

Ah Bonsoir that makes sense thank you!

bonsoir I agree that releasing a small amount of equity from a house where there is lots can work if you can service the increased mortgage and expect to receive a lump sum from elsewhere ( or possibly downsize).

But at sixty with minimal income and no prospects of a lump sum? Too stressful. Too risky.

We have 30k for each child in a trust fund which we could use if everything went wrong. If we don't need it, it is intended to be a deposit for a house.

We pay fees out of monthly income - I have a monthly standing order of 2k into a separate fees account which I can top up if needed. It currently stands at around 5k in surplus.

We have almost no mortgage so if necessary we could down size, be mortgage free and pay the fees out of the excess equity.

People are entitled to make whatever trade offs they like between financial security and their DCs' education. Not many people are fortunate enough to have so many resources that they can have exactly what they want. I am in the position of having more financial resources available for educating my DC than I have real options for getting the type of school I want (I know what I want it to look like, though!). I'm not going to judge anyone for spending a lot on school fees.

Out of income here but I only have 1 child, I couldn't afford 2 sets of school fees. Ds is almost at the end of his GCSE's. He can stay for A'levels but he needs 5 A's and I hope he'll get these but it depends on whether he's prepared to work a little harder. My job is pretty secure (touch wood) and the cost of living here is fairly low (east midlands).

Its a very big financial commitment and I would want to be very confident that the school was top notch and the best option for the child in question. We are high earners and we still find it a big commitment. The fee increases year on year are not to be ignored. You can quickly find that something that was affordable can become unaffordable a couple of years down the line.

This thread has made me think that a specific school fees pot is probably a good idea. If nothing else it buys us some time (although that is why we have an interest only mortgage so that we have flexibility if needs be)

We pay out of earned income and I also put aside sufficient monthly to fund university for 3. Once they actually go to uni I will feel rich