Smart Ways to Save for Your Child’s Education

In today’s world, every family wants to provide their children with the best education possible, whether it’s within the public or private system. However, as the cost of living continues to rise, many households find themselves focusing on immediate expenses. Nevertheless, planning and saving for your child’s education is now more crucial than ever.

School Kids. Smart Ways to Save for Your Child's Education


Interestingly, the cost of education is increasing at a rate approximately three times that of other general living expenses, as indicated by the Consumer Price Index. This upward trend is expected to persist into the future. Therefore, it is imperative to plan for this expense, which will not only help you define your short and long-term financial objectives but also create a balanced strategy to achieve them.

Several factors should be taken into consideration when planning for your child’s education, including:

  • Your Tax Position: How taxes impact your savings and investments.
  • Your Debt Position: Managing existing debts and their impact on your ability to save.
  • Investment Time-Frame: Determining when you need the funds for education.
  • Risk Tolerance: Assessing your comfort level with different investment strategies.
  • Discipline: Staying committed to your savings plan.
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There are various strategies available to meet the ongoing expenses of your child’s education:

  • Managed Investments (and Shares): Managed funds enable you to build a diversified investment portfolio over time, benefitting from compounding returns and regular contributions. This portfolio can be used to cover annual education costs, providing more control than other options.
  • Paying Off Mortgage and Redraw: Accelerating mortgage payments can be a straightforward way to save for education. If your mortgage offers a redraw facility or an offset account, you can withdraw amounts as needed to cover educational expenses.
  • Prepaid Education: Some schools allow you to prepay tuition fees years in advance, helping mitigate the rising cost of education. This can be done directly with the school or through financial providers, earning credits against future tuition fees.
  • The Grandparents: Inheritance planning can be leveraged to fund your child’s education. Arranging for a bequest to skip a generation and be applied directly to your children’s education can provide significant advantages.
  • Insurance Bonds: These are tax-paid investments with potential tax advantages, especially for high-income earners with a long investment horizon. You can contribute up to 125 percent of the previous year’s contribution annually and enjoy tax benefits.
  • Education Bonds and Scholarship Plans: These plans are tailored for education expenses and include a contributions account (tax-free withdrawals) and an earnings account (taxed at a corporate rate of 30 percent). Providers can claim a deduction for prescribed education expenses, making these plans attractive for tertiary education.

While saving for your child’s education may seem challenging, the right financial strategies and a well-thought-out plan can make it more achievable than you might think. If you’re ready to begin assessing your financial situation and long-term goals to secure your child’s education financing, please don’t hesitate to contact us today.

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