According to Ryan Dobbrick from Cotter Financial Services, education is among the largest expenses faced by Australian families and one that is about to get even larger.
“It is critical that parents are prepared and that begins with awareness. For many people, they simply do not realise the significant cost of educating their children and of course, this cost increases dramatically if parents have desires for private school education.
“The key is to begin planning early, considering a realistic savings strategy before children begin school and that continues throughout the schooling years,” Mr Dobbrick said.
For parents whose children will go on to tertiary studies, there is little chance of the costs abating as they can expect to pay between $6,152 and $10,240 per child per year for the three or four years of an undergraduate degree, depending on location and discipline2.
And Australians would be unwise to rely on government loans to cover their children’s tertiary education expenses.
Indeed, the 2015 Intergenerational Report3 states that government spending per higher education student is projected to fall from $11,800 in 2014-15 to $9,400 in 2054-55.
Furthermore, government funding does not cover the additional costs of books, materials, union fees, participation in clubs and sports, transport or accommodation.
“Many parents will need assistance in first calculating the likely cost of education for their family and then setting out a financial strategy that will enable them to achieve their education goals for their children in relation to their other financial commitments.
“Appropriate strategies may include savings accounts, term deposits and investing in shares and managed funds and implementing specifically designed education financial plans,” Mr Dobbrick said.
But according to Mr Dobbrick, shoring up children’s education involves more than just savings as parents need to be realistic in terms of catering for the long term commitment of schooling, by anticipating the impacts of future unexpected events.
“It is essential for parents to consider unforeseen events that could jeopardise their financial position, such as sudden loss of income through injury or illness or, in the worst case scenario, death or disability of one or both parents. While savings for the kids’ education may sound straightforward, in reality it involves many interrelated factors and this usually requires professional advice,” he said.
Mr Dobbrick said that experienced financial planners will recommend strategies for parents to protect themselves and their family from unwanted events that could deprive them of their income and their family’s ongoing financial security, including funds earmarked for their children’s future education,” he said.
“Having appropriate personal insurances in place for both parents is important and this needs to be approached in tandem with asset protection structuring and estate planning. In the event of a claim for the untimely death of one or both parents, it is important that financial matters are clearly documented so that the family may recover as quickly as possible and ultimately achieve all their financial goals, not only those for education,” he said.
The team at Cotter Financial Services are available for consultations with parents to discuss education savings strategies within the context of your whole-of-life financial planning arrangements.
Cotter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357 306 trading as Fortnum Financial Advisers. This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining professional financial advice specific to your circumstances.
The views expressed in this publication are solely those of the author; they are not reflective or indicative of Fortnum Private Wealth Pty Ltd’s position, and are not to be attributed to Fortnum Private Wealth Pty Ltd. They cannot be reproduced in any form without the express written consent of the author.
1. ASICS MoneySmart website, accessed 17 June 2015 at https://www.moneysmart.gov.au/managing-your-money/saving/saving-for-your-childrens-education
2. Indicative undergraduate fees for Australian students, University of Queensland website, accessed 18 June 2015 at http://www.uq.edu.au/study/indicative-fees.html?level=ugrd&nationality=australian&dual_degree=False
3. 2015 Intergenerational Report, Australia in 2055, accessed 17 June 2015 at http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/2015%20Intergenerational%20Report/Downloads/PDF/2015_IGR.ashx