What are the ideal ways to save and pay school fees? Take a look below at some of the most popular financial investment options.
# Individual savings accounts or ISAs
In principle, financial planning for paying school fees must start from day one. The tax free advantages of an ISA mean that Individual Savings Accounts are a must when parents are looking to save money. You have an overall limit of 20,000 a year from April 2017, which will see returns given tax free. You can maximise your ISA allowance between a combination of a cash ISA (everyday savings you do not pay tax on) and a stocks and shares ISA (where the gains you make are tax efficient). However these days due to the Bank of England interest rate cuts the return you will get from your ISA is not as good as it used to be.
# Invest in funds
Starting to save early is the ideal way to get ahead of the game when it comes to having to pay expensive school fees. It is advisable that you start investing regularly from the day your child is born, this will give you just over 10 years before your child starts secondary school. But, if you plan to send your child to a private primary school, you will have a lot less time to save. By having a longer term investment plan, you can take more risks in building up the maximum value of your investment. As the time for paying school fees approaches, you can move your investment into a less high risk investment plan. Since the stock market can be extremely volatile, it is best to seek advice from a financial advisor, before taking this step.
# Make use of equity to help with school fees
Do you have enough equity in your property? If yes, you can utilise your property to help pay the school fees. A lot of parents are making use of schemes such as, offset mortgages and re-mortgaging to help fund private education. Often, properties hold the wealth needed to help with the costs involved in private education, and this method has an added bonus – it is tax-free. The only problem is that you will have to pay the sum back, along with interest and even if it is in easy chunks, it will end up costing a lot more over the longer term. One of the most popular ways of affording the school fees is to opt for an offset mortgage, as a set level of borrowing can be agreed at the outset. As the money is not released until you need it no interest is paid until that time.
# Scholarships and bursaries
Applying for scholarships and bursaries is an ideal way to help supplement the cost of private education. A lot of schools offer scholarships to pupils who can demonstrate a particular skill or talent in academia, sports, arts etc, with discounts of up to 50% available to the successful children.
Another great option are bursaries. This is usually given to students who can showcase a potential or an ability that could be profitable by studying in a private school. In such cases, priority is given to students who have spent considerable time at the school, but are now unable to afford private education and require financial support.
# Turn to the grandparents
Grandparents can often turn out to be the integral financial source when funding school fees. This is down to the benefits they gain from their inheritance tax (IHT) savings. IHT is not incurred when a regular contribution is being made from their income.