Savings and school fees

[AlphaApple]

DD due to go to private secondary in September.

We are selling a property which should net us c.£90k.

What's the best way to pay for school fees out of this? We'll need c.£1,200 per month (initially, increasing as school fees increase) but would like the remaining money to be invested as safely and as profitably as possible, for as long as possible.

Has anyone done this and what type of product should I look for?

NB we have no other children or call on this money, it's purely for school fees. We can pay for other school-related expenses out of our income.

Bump?

What's your plan for sixth form after the £90k runs out?

Does the school offer a discount if you pay fees upfront? Some do. I pay termly, which is slightly cheaper than paying monthly. There is a bigger discount for paying yearly.

I’d check carefully how financially secure the school is before doing this though. It does carry a risk if the school folds.

Do you have a mortgage?

The reason I ask is that actually the discount schools give for advance payment is not actually that great and does not usually fix the fees ie. You would srill be liable for rises.

We have found by putting cash into our offset you can either save the saving you get by reducing monthly payments or reduce your term. We also found by putting full allowance into premium bonds we were winning frequently (not the jackpot but equivalent to about 8% a year!!!)

When you say a discount for up front do you mean for the whole 5 years? There's no mention of any discounts anywhere but I could ask.

We have a mortgage, ironically for about 90k but it's fixed until 2022, and the repayments are less than £1.2k per month so paying off the mortgage won't free up enough income to pay fees. I would have looked for an offset otherwise. Although there's not many about these days.

Re sixth form and beyond - we have another property we could sell or our income may have gone up by then.

@Somethingsmellsnice that's exceptionally lucky!

@AlphaApple yes it's worth checking. My daughter's school offers a scheme where any money paid upfront accrues 2.5% per annum, obviously this is the equivalent of 2.5% net which is more than you'll get in any savings account. It'll be a fair amount off if you pay in the whole 90k in one go. But be 100% sure the school isn't going to go bust.....

Thanks @dietcokemegafan , I've scoured the t&c's and there's nothing in there, I've sent an email to the admissions office to enquire.

it's often not in the T&Cs, if you don't get anywhere with admissions then email the bursar

Just had a reply back, discount of 1% offered if fees paid a year in advance. Seems low.

I'd take the 1% discount, that seems OK for the academic year (~10 months?). The safety of high interest savings isn't offering much more for a year's term. Premium bonds average 1.4% just now (not guaranteed) - I'd put some money in for fun. You could lock away some money for 2+ years and try to get a higher interest rate. Also look into interest - paying current accounts.
www.moneysavingexpert.com/savings/savings-accounts-best-interest/

In terms of investing, since you're not looking at long term investment a tracker fund may suit. If each parent hasn't fully used this year's Isa allowances yet, try to do so now with any spare cash, ahead of obtaining the house funds later (you can have straight savings or an investment in your ISAs).

It might be worth looking into peer-to-peer lending, although again there's some risk.

Also, try to reduce school uniform costs by finding out about second hand sales now, in case there are any before your child starts. As well as the school itself, local jumble sales may get some stock. Current parents may be able to help.

Lots of school have links with schools fees plans particularly due to the consumer credit issues with monthly payments. Ours has negotiated interest free monthly payments using the plan.

Thanks all. We're well ahead of the uniform - we have friends with girls a couple of years ahead so have some tips on that.

The fees can be paid monthly or termly in advance, the overall cost is the same.

I was looking for a product that would remain invested while paying out c.1k per month, but I can't find what I'm looking for. I think I'll split it between ISAs and premium bonds. Interest rates are just so low we'll get hardly anything back.

That would be paying out £12k per year? So over 13 percent Good luck with that. If you find it let me know!

Red...does op not mean the investment would need to have circa £1k taken out of it every month for the school fees, not that it would earn 1k in interest? Unless I have misunderstood.

Maybe I misunderstood. Is that not just any savings account though?

Yes, I'm not assuming the capital will be untouched!

I'm looking for something like a savings account but was hoping for maybe some kind of investment product as opposed to just cash savings.

Can you divide it into years?
Y1 you pay up front and get your 1%
Y2 you put into a 1 year cash bond
Y3 you put into a 2 year cash bond
Ys4 and 5 you put into an s&s isa, if you are happy with the risk, and take them out in the run up to needing them.

I’d look at a single premium investment bond and use Prufund Growth. I’d keep 6 months a cash account in case markets do drop but Prufund smooths so doesn’t happen often.