The Spiraling cost of private schooling

by | Sep 2, 2023

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As the school bell rings in a new term, parents up and down the country will have made often tough decisions on which school to send their children to. And if, like the well-heeled, you aspire to the ivy-covered quadrangles, hallowed halls, crisp uniforms and boater hats of a private school, then be prepared to embark on a journey that demands not just academic dedication but a deep financial obligation as well. 

The world of private education opens its doors to those who can navigate the financial commitments – with the average British day school charging between £3,000 and £5,500 per term according to the Independent Schools Council – rising to a whopping £15,432 per term should you wish to follow in royal footsteps to the likes of Eton. 

However, depending on the school, and taking into account that most automatically increase their fees each year, it could soon become routine to spend upwards of £1 million on schooling two children through primary and secondary education.

 
 

And with the prospect of VAT being added to fees under a Labour government threatening to take costs into another league altogether, it could soon squeeze out the middle-classes, leaving private schools the preserve of only the super-rich and royalty.

Offering a glimmer of hope however, digital wealth manager, Moneyfarm, says that for those who wish to pursue the private school route, there is a way to make the dream happen. The key is not to take it for granted, but to start investing as early as possible, specifically with schooling as your goal.

Chris Rudden, Head of Investment Consultants at digital wealth manager Moneyfarmsays: “While everyone’s circumstances are different, the common factor is that investment lifts wealth from one ‘league’ to the next.

 

“Some prospective parents may have felt they would have to give up on the idea of privately educating their children, or take on debt to make it happen. Some will even be resigned to working beyond their intended retirement age.

“But the good news is that paying for school fees is less about your salary, and more about how you invest it. With an initial investment of a few thousand – perhaps from grandparents – and monthly contributions affordable from a decent salary, it’s possible to raise a sum of money that can bring school fees down to a manageable size.”

Moneyfarm’s Stocks and Shares ISA calculator indicates that with an initial investment of £15,000 and monthly contributions of £500, after ten years, investors can expect to have nearly £105,157 (from an average of projected values).That’s more than 30% of the costs of private secondary education for two children at current rates (see box below). On the same terms, over 20 years, that figure would be £259,158 or 77% of those costs.

 

Of course, the more you have, the greater the return. Those able to make an initial deposit of £30,000 in a General Investment Account (GIA) and contribute £800 a month for 15 years could then expect to have in the region of £288,454. That’s 93% of the average cost of secondary education for one child even assuming a fees increase of 3% per annum, or 38% of the cost of secondary education for two children, even assuming an increase of 9.26% per annum (see box below).

The sooner people start investing, the better, which is why even people in their 20s would be well advised to take the plunge even before children come along, says Rudden. “Time in the market and compound interest are key to maximising returns over a period of ten to twenty years.”

However, Rudden emphasises that it is never too late to benefit from a smart investment.

 

“With school fees likely to continue rising in the years to come, investing now to make the most of what you have could make the difference between having options and simply being priced out of private schooling altogether”.

Average independent school costs accumulated over time (source: Moneyfarm)

At the current level with NO further rises in fees, this means:

 
 1 child2 children3 children
7 years (11-18)£ 169,196.30£ 338,392.60£ 507,588.90
11 years (7-18)£ 265,879.90£ 531,759.80£ 797,639.70
17 years (1-18)£ 410,905.30£ 821,810.60£ 1,232,715.90

Assuming 3% rise per annum, education starting this year:

 1 child2 children3 children
7 years (11-18)£ 185,208.61£ 370,417.21£ 555,625.82
11 years (7-18)£ 309,575.95£ 619,151.90£ 928,727.85
17 years (1-18)£ 525,997.16£ 1,051,994.32​£ 1,577,991.48

Assuming 9.26% rise per annum, education starting this year:

 1 child2 children3 children
7 years (11-18)£ 381,357.03£ 762,714.07£ 1,144,071.10
11 years (7-18)£ 732,243.51£ 1,464,487.02£ 2,196,730.53
17 years (1-18)£ 915,286.19£ 1,830,572.39£ 2,745,858.58

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