How to save and pay for private school fees

If you want to send your children to private school, you should start planning early.

Unless you’re lucky enough to get a windfall, you’ll probably need to save and invest wisely to keep up with the rapidly rising cost of fees.

Learn how many parents save for private school fees below.  

Giving your children the best education comes at a cost. 

With smaller classes, more focus on one-to-one teaching and an array of extracurricular activities, private schooling can enrich your child’s learning – not to mention increase their chances of achieving potentially higher grades. 

For most UK parents, giving their child a private education is out of the realm of financial possibility. 

Aside from exploring bursaries, scholarships and grammar schools (if you have one in your area), you will have to fork out if you want your child to be privately educated.

There is no getting around it, but there could be ways to prepare for school fees in a more financially savvy way.  

How much do private school fees cost? 

According to MoneyWeek, the average fee for independent schools is currently £18,063 per child per year, increasing to £23,925 for day pupils attending boarding schools, and £42,459 for the average boarder.

School fees tend to increase at a higher rate than inflation, so it may get more difficult to send your children to private school. Finding ways to bring down the cost is crucial for many families. 

When should you start planning for private school fees? 

This question has a simple answer: as soon as possible. 

You may need to save a significant amount, so it’s important to put money in the pot early. 

It’s also worthwhile having a savings goal in mind. Do you want them to go to prep school, an independent secondary school or a private sixth form? And will you need them to board if your preferred school is far away? Have you included the cost of trips? 

Once you know the private school fee costs, not only can you get a savings strategy in place, but you can think sensibly about whether or not you can afford it. 

Although your child’s education might be your priority now, you don’t want to sacrifice your retirement savings and ability to make ends meet. 

Are private school fees tax deductible? 

You can’t use school fees to offset your tax bill.

But there are other ways to pay and save for private school more tax efficiently. 

One popular route is going through the grandparents, who may be happy to help out or use their grandchild’s inheritance in this way. 

One big plus side is that grandparents can gift money to grandchildren without incurring a tax charge, but it’s not the same for parents. 

There are two key ways to make sure the payments they gift are tax-free: 

• Set up a trust – when the grandchildren are named as the beneficiaries, any money the trust earns will be owned by the children, meaning you can use the children’s tax allowance.
• Set up a family business – if possible, your parents could put assets such as property to set up a business and name your children as shareholders. They could pay the school fees as dividends to the children, again using their tax allowance.  

Both of these scenarios can be very effective, but they are complicated to set up.

We’re not saying don’t do it – we’re saying to get advice before you go down this route. 

Can you use investments to pay for private school fees? 

Absolutely. Unless you have a very high income – and one increasing at the same pace as that of private school fees, it is unlikely that you’ll have enough spare cash to pay for the fees unless you’ve made some investments. 

Here are two common routes to explore: 

• Bonds – these investments are generally seen as less risky than stocks. Your money will be locked away for a set number of years, but you could time it so that you get your cash and returns by the time your child enters private school. Income generated will be taxable, which will be trigged by a chargeable event – such as withdrawing money from it.
• Stocks and shares ISA – any profits generated in an ISA are tax-free. With a stocks and shares ISA, you can invest the money saved in a bid to make significant gains and enjoy them tax-free. 

Other ways to manage private school fees: 

Investing isn’t the only way to get the cash you need to pay for school fees.

You could borrow money, and lots of parents remortgage or use offset mortgages to release money.

Be aware that any money you borrow will need to be repaid, and you’ll have to pay interest on it.  

You should also consider taking out insurance. The likes of life insurance, critical illness cover, and income protection will help to pay for school fees should anything happen to you. 

If private school is on your wish list, a financial adviser can help you get a plan in place that works for your finances and other life plans.

Search our directory to find an IFA near you. 

If this article is relevant to you, it might also be helpful for you to know more about financial coaching. What is a financial coach? We’ve got the answers.