School Fees

//School Fees

The education sector is one of the best markers of inflation and economic conditions. If the schools are full and prosperous it shows that those local areas are doing well. However if your local International schools are struggling to obtain enough pupils to cover costs then the risk that fees may go up just to keep the schools open increases. Either way there will be pressure placed on the cost of International school fees.

Education fees for higher education are free in most European Countries (excluding England) but with all major countries struggling with high debts how long will this benefit continue? Higher education should be planned for as early as possible.

Three simple Facts:

  • Education fee costs will continue to rise at a rate approximately two percentage points above inflation;
  • The average rate of annual increase is 6% – which means that the fees will double every 12 years.
  • Starting an education savings plan at least 10 years prior could save you as much as 50% of the cost.

The costs of private & university education are continually increasing, and many families and students fail to plan to make the most of their potential, or are often being left with a legacy of debt. “It is said that “patience and discipline are the parents of financial success”. As such, patience and discipline are the keys to successfully building an education fund for your children”.

UK: Boarding School: Ever wondered what the costs of sending a child to a good, UK Independent Boarding School would be? According to a recent daily telegraph article in the UK , the annual costs of the top Independent Boarding Schools will soon exceed £30,000 per annum. UK University: The average cost of a three-year degree course in the UK is now more than £25,000. Since the elimination of student grants, student debt in the UK is now estimated to be a staggering £5 billion. Combining fees and living costs annual costs could exceed £45,000 per annum? Although in some European countries University fees are free for those who qualify, Scotland is a prime example. USA University: The average cost of a four year degree course in the US is in excess of $23,000 plus living expenses of circa $25,000.

It is very important that you start saving for education fees as quickly as possible. Using a 15 year example below:

Parent A started saving for his children’s school fees in 1995. He invested £1,000 per month and achieved an annual growth of 6%. At the end of the 15 years he had a school fund balance of £288,310 in 2010.

Parent B started saving for his children’s school fees in 1998. He invested £1,000 per month and achieved an annual growth of 6%. At the end of the 12 years he had a school fund balance of £208,950 in 2010.

The cost of delaying his start date for parent B is £79,360.

An interesting metaphor to illustrate the effect of compound growth in later years and why it is so important to start early is the golfing example. If at the start of a game of golf you bet your partner 10c for the first hole and you agree to double the wager each hole, so that the 2nd hole is 20c, third is 40c, and so on. What do you think the wager would be at the 10th? $51.20, at the 15th $1638.40 at the 18th it rises to $13,107.20.