£500K starting Private School Fund - sufficient?

[Account18]

We have 2 sons who will start in pre-prep over the next 2 years.

In today’s money:

• We have savings/investments of £500K set aside for this purpose
• Local school fees are roughly £15K for primary / £30K for secondary (excluding extras)

Question:
Would this be sufficient to pay for private schooling over the next ~16 years?
My assumption is that both the investments and the fees will increase over time, but trying to sense check whether the starting pot is broadly in the right ballpark.

I’d be interested in both:

• Anecdotal experiences from those who’ve done something similar
• Quantitative views on whether the maths broadly works

Note:
This is a separate pot specifically earmarked for school fees (separate from pensions, housing, inheritance, etc). Our pensions are on track, housing costs are covered by income, and there may be some early inheritance available if needed (though we’re not assuming that). We also have some excess income each year that could contribute if required.

Trying to gauge whether £500K feels sensible/optimistic/cautious

Thank you

Well assuming that cost is for both kids, that averages £30k a year for 16 years so will cover it with extra left over, even without investment growth - but I’m sure you have a calculator too so that’s a given really!

Do bear in mind fees seem to increase year on year (even without considering the VAT increase). My son’s fees were £21k a year when he arrived age 7 and are now £31k a year age 15. This isn’t the difference between primary and secondary, it’s just fee increases. Obviously less manageable with two
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You don’t need to spend tons on uniform, all the schools I know have a Nearly New Shop. Coach to school and back is £400 per term where we are but you may not need it. A big expense is the annual ski trip which is about £1800 per boy, but again ski kit can be bought second hand from the school. Not everyone goes though, and there are other much cheaper trips. If your kids are sporty, the kit can add up too. But by the sounds of it this isn’t unmanageable for you.

You would need to separate this out into short term and longer term. I would not recommend investing the money you need for the next 4-5 years' fees- that should be in cash or similar (a gilt ladder would work well). The money for later years can be invested and you then just move across each year's fees as you go, so you can always see the next 4-5 years in cash (or short dated gilts) and what's left is able to grow. You can put it all into a spreadsheet and play around with assumptions about investment growth and inflation.

Remember that fees often rise above inflation as well.

Well assuming that cost is for both kids, that averages £30k a year for 16 years so will cover it with extra left over, even without investment growth - but I’m sure you have a calculator too so that’s a given really!

I don't understand this.

@CherrySparklingI divided £500k by 16 years and it comes to £31,250. My point was that I’m guessing OP didn't need help with that bit..

Humblebrag alert 😀

Fees in y13 will be more than double what they are in reception.

No I don’t think it will be enough. Not even to cover one child’s schooling potentially.

when you take into account a realistic 5% YoY price increase the pre-prep / prep of starting from reception could cost you £122k. This is based on the £15k start point this year and doesn’t take into account any additional costs (uniform, trips, clubs etc).

At £30k now by the time you get to Y7 the fees could be £40k again using 5% YOY. Flow that through to end of A levels and you are looking at £325 - again no trips, uniforms, clubs etc. So one child realistically could cost £447k for reception to end of Y13 private eduction.

5% could be too low - who knows but based on comments on MN seems a pretty realistic number but increase to 7% and it’s over £500k for one child. That said when you do the sums the outer year increases look unaffordable to almost all but the super wealthy so not sure how sustainable it would be for most schools to increase fees by this rate!

£500k is a staggeringly good amount of money, and an unimaginable amount to have to start this journey with for a lot of private school parents and for one child based on investment growth/income over the period I’d say you would be fine. But for 2… personally I’d be saving alongside this amount and not relying on any returns to get you to the number you need.

Ah! OP is talking about private school from pre-prep onwards so 28 years rather than 16.

I don’t know how to work out compound interest etc. but ds1 started in KG, his fees were 8100 per year, it’s a 3-18 school, he will do y13 next year, and if fees stay the same (they won’t) his final year will be 19k

we are in the north and there is a partial scholarship on the senior fees.

I think I'd probably estimate that fees increase at about the same rate as investment return (assuming funds for the later years, and shifting to fixed interest fir the near term as you go along).

And your prep fees presumably aren't £15k all the way through, I'd expect them to gradually increase , say YR, y1 ->£15k, Y2, Y3 ->£20k, Y4-Y6 -> £25k, senior school->£30k (adjusted for today's prices,l

So I think you'd probably need around £700k invested on Day1 ro fully cover fees.

It would be quite unusual not to pay any of the fees out of income, and you say you have excess income each year currently. I think you'd need an extra £10-£12k out of income per year to cover both sets of fees (saving it in the cheaper, early years). And you're going to want them to do instruments/extra curricular in addition. Kids do get more expensive as they get older!Probably another £3k-£5k per child per year.

You could send the children to a state primary and put them in independent at year 7. My son is bright and has managed fine in state primary despite being in a class of 38 from KS2. He is exceeding expectations in everything and is getting full marks in his mock SATs. We did pay for a tutor to prep him for entrance exams which we understand he achieved excellent marks in. We have saved a 7 years of school fees that way.

I think plenty of people find a way with a starting pot this big. We have similar, but are doing 3 kids for secondary only. Obviously, hoping the pot continues to grow every year. It is a lot of money putting kids in secondary, so understand the worry of is this enough. It sounds like you guys should be fine, provided that you also keep earning.

Like PP, you need to be cautious about the fee increases. When my DS1 started reception eight years ago, his school was £18k pa. It’s now just over £30k pa for DC2 at the same school. The VAT is of course a sizeable chunk of that but it’s also that the school has been hit by the rising costs of everything else too, NI, etc,and of course has to pay the teachers decently who are also facing the costs is living crisis. If we had realised this was going to happen, we would not have gone down the private route for primary but would have saved the money and waited for secondary school.

It is worth it?

@Account18 are you happy to spend this amount of money if your children don't go on to well earning careers? I know many private school people who don't have careers after they leave school and wonder if the funds could have been better used eg given to them for a house deposit.

You are in a fortunate position of having that sort of pot available. That sort of buffer just isn’t there for many people paying fees from income. It may not entirely be enough for reception to 6th form for both without some topping up. If you don’t want to pay any out of income you’d could look at ‘state until 8’ or state sixth form which would reduce the outlay.

When we’ve plugged in the numbers, we’re expecting senior fees which are currently around £24k to be closer to £40k by the time by youngest finishes a that feels like quite a scary number.

For us, we wanted enough to ensure we wouldn’t ever be paying for two fees concurrently. That has meant a prioritisation of secondary and utilising state primary for as long as we’re happy.

Assume the fees will increase at the same rate as the money grows but that secondary costs more than primary. It’s 14 years x 2 kids, so that’s circa £630k. So it’s not enough but not miles off.

I have come across plenty of 'ex public school' complete idiots ..............

I would at least put them through state primary schools

The usual resented personal opinions about private school students which are nothing to do with what OP is asking.

We pay the fees from our income each year. Never had a saving pot so you are already doing better. I am glad we are in the last set of fees and done. We were lucky to have been able to. We would not have been able starting now with the extortionate fees and VAT. All the best for your kids.

I dont think £500k would be enough to cover 2 in private from pre prep

If you can't afford what it will actually cost, perhaps consider state schooling for the first few years

We have friends that put their DC through pre prep, prep and secondary, and it was £500k for the two of them. Good schools but not top of the shop for fees (apart from sixth form for one of them - that was £100k alone). The youngest left secondary several years ago, so pre VAT.

Have you considered university costs or will they take the loans?

Ok I have done the maths in a really pessimistic way - assumed that your investments will only accumulate 2.5% growth each year while school fees climb 5% every year. This model has you running out of money just as your eldest is tackling GCSEs and horribly in debt by the time the youngest finishes.

However if you can top up your investment fund with £1,500pm starting now, and increase that every year by at least inflation or whatever % salary increase you obtain (whichever is higher) then you will be comfortable and eliminate that shortfall. £1500pcm will sound a lot to people with an average kind of income but if you have the kind of income that makes 2 kids at private school feasible then that won't sound like a difficult amount.

The chances are that the actual figures will be kinder. Run the projections again when your kids are in y8 and y10 - you may have a significant surplus and be able to do a cool holiday - or you may not.

Following this thread with interest!

We have circa £300k savings and investment (share of investment property - no mortgage). I am hoping that in the lower years the interest / rent will pay for the majority of the fees and only in secondary would we need to draw down any of the assets to use for fees.

But we can pay it out of our salaries, he will start preschool in September so still some more time to save more.

Mindful it’s very different with 2 kids.

I appreciate the many responses and thank everyone for their guidance on their experiences and some of the maths behind it.

We can afford to top up annually from income - but I was hoping what we had already put aside might be enough!

is this pot in a tax efficient wrapper eg ISAs ? Otherwise remember you’re paying 40% tax on the gains. (Assuming you’re additional rate tax payer etc)

to this end, we fill ISAs and pensions then keep £60k in tax free premium bonds so we’ve always got the next year’s fees readily available. (£30k per child pa)

I think £500k is a good start but you’ll have to top up, depending how the investment is managed and how tax efficiently

Not enough yet but most of the heavy lifting done already.
There are ways to reduce costs- financial advisers can help plan for this. Is pre-prep non-negotiable? Is 6th form essential? If you have places in an all-through school you can dispense with tutoring for senior school admissions. Scholarships that aren't means-tested tend to knock 10% off full fees. Many schools operate fee reduction schemes if you pay in advance- these may give you discounts for advance fees (as you will he losing out on interest/investment growth( and others may agree a fee freeze. You'd need to do robust due diligence to be confident in the continuing financial viability of the school. In the current climate securing two children for 10 years is very attractive to schools so you might be able to negotiate a sibling discount for DC2.

The other element to think about is whether one or both DC might end up boarding, in which case your £500k certainly won't cover all years from 4-18yrs.

From what you've described though the ambition is achievable for you with good planning and continued saving.