Funding education costs for their children is a prospect that exercises the minds of many families. The demands of modern society increasingly –
- lead our younger generations into ‘services’ rather than ‘trades’ work; and
- the minimum standard of education required, constantly increases.
The costs of raising children from birth until adulthood are significant. An eminent survey in around 2009, estimated that it would be around $1,000,000 from birth to age 25. Obviously, the cost to individual families will vary significantly depending on a range of variables, including –
- the financial resources available,
- the lifestyle adopted by the family and
- the number of children in the family.
For most families the basics are core to these costs: basics such as providing –
- shelter, food and clothing for the children;
- health, entertainment, lifestyle items, holidays etc.
Some of these items may seem more discretionary than basic, but as the media remind us, education is both –
- a high priority, and
- a high demand on family budgets.
The majority of the relevant costs are funded from recurrent income managed through careful and disciplined family budgeting. By far the most important aspect of investing for your children’s is to start early – and to save regularly.
Strategies for funding education costs of your children
Having identified that the cost of raising children –
- appears to be prohibitive to many families, and
- established that one of the greatest costs associated with that vocation is their education,
what can we do to ensure that there are funds available for those critical years?
For many of our clients looking for a strategy in this regard, the secondary schooling costs are targeted.
Depending on –
- the number of children to be provided for, and
- their ages when the strategy is commenced,
each of the following strategies is available:
- Insurance bonds
- Scholarship funds
- Managed funds
- Term deposits and higher-yield savings accounts
- Self-funded annuity-style investment
- Direct shares
- Pay off your non-deductible debt (home mortgage; credit cards; personal loans etc)
- Pre-pay school fees
- Family trust
Funding education costs in a practical way
The advantages and disadvantages of available options need evaluation to select the strategy most suited to your family circumstances,
- their simplicity,
- tax effectiveness,
- liquidity,
- adequacy of outcome,
- title on demise,
- ability to continue contributing and cost, and
- the available timeframe.
Identification of surplus funds available for the necessary funding in the appropriate timeframe is a good start to the process. As mentioned above, a key starting point in that regard is –
- the establishment of a budget,
- understanding the risks to being able to live to that budget – and then
- rigorous discipline, adhering to the budget.
Reviewing progress toward goal achievement
Funding education costs does not come ‘cheaply’. The tried and tested way to achieve financial goals such as this one, is to –
- develop a plan,
- document it,
- review progress of its implementation regularly,
- revise it as circumstances change – and
- ‘stick to it’ (strategically).
These are processes that the advisers at Continuum Financial Planners Pty Ltd regularly work on with clients. To ensure your family isn’t –
- disappointed (or indeed, disadvantaged) when it comes time
- to fund the children’s education,
make an appointment with one of our experienced advisers to get your strategy under way. To do so –
- phone our office, on 07-3421 3456, or
- at your convenience, use the linked Book A Meeting facility.
(This article was originally posted by us in December 2009. We occasionally refresh/ update it, most recently in April 2025.)
