Planning for Your Child’s Education: Start Early to Secure Their Future.

 

My key message is that the earlier you start planning and saving for future education costs, the better. Whether you’re saving for private education or university costs, the sooner you start to plan and save, the more advantage you can take of compounding investment returns and tax efficient allowances.

It’s important to consider the whole cost, not just the fees associated with private education and university, but everything else on top. For schooling you should consider co-curricular activities, excursions, uniform and transportation, and for university living costs alongside accommodation.

University student loans are available for everyone but the amount a child receives is means tested against the parents’ income. Higher earning parents may find their children can’t access a full student loan, so you will need to consider how any gap is funded.

When you sign a child up to a private school you need to be comfortable that you can meet the fees over the whole school journey, be that up to age 11 or 13 for a prep school or to age 18 for their senior years.  Whilst fees may be affordable from income in the early years this maybe more challenging for later years or when multiple children are attending.  Check the fee levels on the school website to see how much they may increase to for later years, as the cost can jump considerably as they progress. School fees have always tended to rise above inflation and as of January 2025, private school fees are now subject to VAT.

It’s about planning for the full cost and ensuring you have a plan for how this will be funded be that income, savings and investments, family help or a mix.

Smart Saving Strategies for Education

The most obvious start point is to consider if both parents are funding their ISAs. Each parent can currently save up to £20,000 per tax year. Growth on ISA investments and income taken are tax free. So, ISAs are an efficient way to save for the long term without locking your money away in a pension, for example. Converting cash savings into tax free investments is the easiest way to make sure your money goes further when you need it.

Junior ISAs are another allowance worth considering to help with University costs. You can save £9,000 per annum per child and these funds are available to the child at 18.

Cashflow planning: Ensuring long-term affordability

A cashflow plan can help build the long term picture. Sometimes, what we think we can afford, and the actual costs associated, aren’t aligned. Cashflow modelling brings this to life visually,  helping you determine whether it’s affordable. Can you do it comfortably as things currently stand or do we need to think about using investments to fund later years? Having this level of information ensures we can maximise your investment returns while carefully balancing the investment risk you are prepared to take within the timeframe you have. A clear cashflow model of today and the projected future is a great start point.

Exploring Family Support and Trusts

Investigating whether grandparents have any capacity to assist can be a useful planning tool and a great way to pass inter-generational wealth down through the family. Gifting from excess income or lump sums of capital into trust can be ways to boost the education fund and help to mitigate a future inheritance tax bill. These can be complex areas that need specialist advice, so start the conversation within the family and then bring a Financial Planner in to help navigate the complex rules.

Take Action: Build Your Education Plan Today

The best thing is to engage with us as early as possible and get a really solid plan in place. There is so much to consider when planning for future education costs, it can be very overwhelming.  There is no right answer – it is very personal to you. We can help you start planning and saving for this as early as possible.

Disclaimer: The above information is for educational purposes and is not a personal recommendation or investment advice. Content is accurate at time of writing. Tax limits may change in future. Capital at risk. Wise Investment is authorised and regulated by the Financial Conduct Authority (FCA 230553). Wise Investment is not authorised to provide advice on defined benefit pension transfers.