SCHOOL FEE PLANNING – START EARLY
Making the decision to privately educate your child is a big step and a massive financial commitment
School fees are likely to rank amongst a family’s largest expenses, so starting to save as early as possible and encouraging family members to contribute to savings accounts, will help you accumulate the sums you need to cover all the costs involved.
Investing could be a good option if you have a longer time frame, say ten years plus. Although there are risks involved, investments do provide the potential to offer more favourable returns than those derived from a savings account; however, this is certainly not guaranteed. By investing money monthly, you can benefit from pound cost averaging, to smooth out any market volatility.
Making the most of their own ISA allowances, (£20,000 for the 2021/22 tax year), parents can invest and pay no tax on their returns, as well as withdraw their money without incurring tax. In addition, grandparents may choose to make use of lifetime gifting, which can have the dual benefit of reducing the value of their estate for Inheritance Tax purposes and deriving satisfaction from seeing their money benefit their grandchildren during their lifetime.
Not advisable for all, but in some instances, older parents are choosing to take their 25% tax-free lump sum from their pension to fund their child’s education, leaving the rest invested for income in retirement. If this is a possible strategy, it is important to leave enough for retirement. This may impact on your income in retirement and could affect the amount of money you contribute to a pension.
When embarking on a major financial commitment to your child’s education, taking financial advice will ensure you don’t compromise your own financial security, helping you plan effectively for the years ahead.
The value of investments can fall as well as rise. You may get back less than you invested.
Investors do not pay any personal tax on income or gains, but ISAs do pay unrecoverable tax on income from stocks and shares received by the ISA managers.
Supplied by Citrus Financial whose mission is to help you achieve financial peace of mind. Contact them today on 01732 834834 or email them [email protected]
Cover image: Photo by Ben White on Unsplash
feature image: Photo by NeONBRAND on Unsplash
Author: Helen Loder
Co-Director of Sevenoaks Mums