Saving for your children’s education

With the price of private school fees being anyway up to $20,000 (and even beyond) per child per year, sending you children to the school of your choice may be one of the biggest investments of your life.

Of top of this, with government plans to increase university fees and change indexation of HECS debts, many parents are also wondering how they can help their children avoid starting life with a debt burden.  The trick is to start saving for education costs early and to put some thought into the most effective savings scheme.

If you own your own home, then a mortgage offset account can be a great educational savings option.  You will simultaneously minimise your interest payments and your tax liability and then you are able to draw from the account when the time comes.

Family trusts are another effective means of saving for education costs but only in specific circumstances.  If you or your spouse has a low income, then this is a great way to minimise the tax liability on your savings.  Trusts are also a good option if you are planning for educational costs for children once they are over the age of eighteen as children under this age are taxed are extremely high rates (up to 66%).

If your employer is open to the suggestion, having your children’s school fees paid as a fringe benefit is also a great way to cover the costs as it essentially amounts to an interest-free loan from yourself.

If you are struggling to find the cash to cover twelve years of private school education, especially for families with more than one child, then a reasonable compromise might be to send them to a private school for their final years of secondary school only.

It is also worth noting that while allowing your children to incur a HECS debt may go against your instincts, it is actually not such a bad idea.  Even if a HECS debt is indexed at a higher rate, this will still attract less interest than a mortgage and will also be lower than the rate of return on a typical investment portfolio.