Saving for Children’s Education

Educating your children is a major expense and with children living at home for longer, many parents find themselves contributing to university education as well as schooling.

The sooner you start saving for your child’s education, the better opportunity you will have to assist them.  A report released by the National Centre for Social and Economic Modelling for AMP in 2006 estimated that Australian parents spend on average $50,000 on education and childcare for each child.  If you choose to send your children to a Private School for both junior and secondary education, the cost can go up to as high as $250,000.  Private education of children can be one of the life’s major expenses.

Enrolments in non-government schools do however continue to rise in recent years, despite the poor economic outlook for Australia and overseas.  The Australian Bureau of statistics says that enrolments in non-government schools have risen by 19% over the last 10 years, compared to an increase of 1.5% in enrolments of government schools.

In a recent survey by the Commonwealth Bank using Newspoll, about half of all parents use their general savings to pay the school fees.  Of the remaining half, around 30% use savings from a special education saving account, 28% use income from specific investments and 21 % take a part-time job to pay the additional fees.  The remaining 14% use a personal loan or draw down on their mortgage to pay for their child’s education.

Approximately 40% of Australian parents save for their children’s education in advance with a majority of them falling short.  More than half of these parents put aside less than $100 per month for their children’s education.

It is recommended that having money on hand to pay school fees is a lot better solution than borrowing money at the time.  The interest payable on the borrowings can greatly increase the amount you are actually paying for their education.

The key to funding your child’s education is to start early, preferably when they are born.  The earlier you start saving, the less your child’s education will cost you because part of it will be paid by investment earnings.