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Budgeting for private school on a single income
By MyBudget Editor

MyBudget client Jenni moved around a lot when she was a kid. “I went to four different primary schools,” Jenni explains, “So for my own daughter, I wanted stability.” Discover how Jenni budgets for private schooling on a single income. Along the way, we examine the need-to-knows, alternatives to private education and ways to help your kids achieve their educational goals without breaking the bank.

Many reasons why families choose private schooling

Everyone wants to give their kids the best start in life possible, and for some that means private schooling. But private education doesn’t come cheaply. For most families, it involves planning early, saving hard and making sacrifices. 

MyBudget client Jenni is 39 and mum to five-year-old Charlotte. Having moved house and schools a lot when she was little, she was determined to offer her own daughter more stability.  “I’ve chosen a school that offers reception to year 12,” explains Jenni. “As long as my daughter’s happy and achieving, there’ll be no reason for her to ever change schools.”

Jenni continues, “I enrolled Charlotte when she was six months old because I knew that places would fill up quickly. It’s also the school that my niece goes to. Being a single mum, I looked for a school that could provide extra support for my daughter if she were to struggle, and by the same token, that they could support and extend Charlotte if she excels.”

There are many reasons why a family might choose private schooling. For some, as in Jenni’s case, it’s in search of a combination of pastoral care, academic support and having her family close by. For others, it may be for tradition, religious reasons, locality or to foster their child’s academic or extracurricular interests.

How much are private school fees?

There’s no avoiding the fact, however, that the perceived benefits of private schooling don’t come cheaply. A recent survey put the average cost of a full private school education (kindy to year 12) in metropolitan Australia at $351,684 for a child born in 2019.

While the average cost of more than $350,000 is pretty mind-blowing, in Sydney and Melbourne this figure tops $500,000, with year 12 fees alone hitting $40,000 for the first time at some schools.

Of course, not all private schools charge the same amount, so it’s important to investigate the fees at the schools you’re interested in. In most cases, you can find pricing information on the school’s website.

When you have the schedule of fees in front of you, don’t just look at the first year of fees. Private schooling tends to become more expensive as your child progresses through the years. Make sure you’re aware of rising costs all the way to year 12.

Beware of fee creep

You’ll also need to factor in fee creep. School websites list their fees in the current year. What they don’t publish is year-on-year price rises which, in many cases, are substantial. Unlike other household expenses, which tend to rise in line with an increase in the cost of living (known as ‘inflation’), private school fees have been rising more rapidly in recent years.

Across 335 private schools, the average fee increase from 2019 to 2020 was 2.8%, and the most expensive private schools increased their fees by 3.5% to 4%. 

At 14 of the most expensive private schools in Australia, fees have increased by an average of 31% between 2013 and 2020. Such increases are one of the reasons that education (both public and private) is the fastest-growing category of household expenditure. According to the Australian Bureau of Statistics (ABS), household education spending increased by 43.5% between 2009-10 to 2015-16. 

Additional private school costs to consider

Along with tuition fees, there are a number of other costs associated with a private education.

Most private schools charge a technology levy and a building fund contribution. Then there are excursions, camps, uniforms and, in some cases, compulsory sport, all of which tend to be more expensive than what you’d pay at a public school. 

In addition, most private schools charge an enrolment fee, which is payable when you put your child’s name on their waiting list. This can range from less than $100 to several hundred dollars. Keep in mind that the deposit is usually non-refundable should you change your mind or miss out on a place.

Private schools are also known to charge a fee when you accept a position at the school, which can run into the thousands of dollars. This cost might not be deducted from your tuition fees and, again, usually isn’t refundable.

Factors to consider when choosing a private school

A number of factors beyond the cost may affect your decision about which private school to choose. 

Do you want a single sex or co-ed educational environment? Religious, non-religious or non-denominational? Close to home? Perhaps your child has a particular interest or skill you want to foster? Or maybe there’s a family connection—you want to send them to the school you went to or where their cousins go. 

Cost also plays into some of these factors. For example, private schools usually offer a sibling discount that increases with the number of children enrolled at the school. If you have both sons and daughters, sibling discounting could be a reason for choosing a co-ed school over a single sex one.

Catholic schools tend to be substantially cheaper than independent private schools. The average cost of a full Catholic education in metropolitan Australia for a child born in 2019 was found to be $148,016, compared to the independent private school average of $351,684.

The most recent statistics from the ABS show that two-thirds of Australian kids attend public schools, with about 20% at private Catholic schools and 15% attending private independent schools.

Start budgeting early

Jenni explains that she added a ‘private school’ savings stream to her budget two years ago. “I said to MyBudget ‘I want this for my child. These are the amounts of money I need to have by these points in time.’ And they said ‘no problems—we’ll add it to your budget and start making payments.”

The school offers a facility where parents can open an interest-earning account and start depositing money into it, which MyBudget handles on Jenni’s behalf. 

Jenni didn’t just look at tuition fees—she pressed the school for a complete list of expenses, including school uniform, books, stationery and excursion requirements, so that her budget was realistic.

“It’s important to ask the school what’s compulsory and what’s not,” advises Jenni. “A school blazer, for example, is $200 but it’s not compulsory until year 4.”

What are the alternatives to paying for K-12 private schooling?

Schooling doesn’t have to be an all or nothing proposition. You can still prioritise education without investing in private schooling and its trimmings. For example:

1.  Move into a desirable public school catchment area

It’s a popular strategy for families to buy or rent in an area where the local public school has a good reputation. You can compare how schools perform using the MySchool website or by talking to other families in the area.

2. Invest in extra education

If the high price of private education is a barrier but you feel that your child’s interests could do with extra fostering, you could pursue a combination of public schooling plus extra education. These could be in language studies, music, dance or drama lessons, extra tutoring in core subjects, or even overseas holidays to visit museums and galleries to expand cultural knowledge.

3. High school only

You could potentially save more than $100,000 by delaying private schooling until your child is ready for high school.

4. Apply for a scholarship

Is your child bright or talented in a certain field? Many private schools offer a range of full or partial scholarships in areas such as academic achievement, music, art, math, science or sport.

5.  Apply for a bursary

Bursaries are means-tested scholarships available to students who the school believes would thrive in their environment, but who need financial assistance to be able to attend.

Ways to save for private school

If private education is a priority for you, like Jenni, it’s a good idea to start saving for private school as early as possible, even as soon as your child’s birth.

Or some families approach schooling as a phase in their financial lives. They might make it a priority, for instance, to pay off their mortgage before enrolling their child in private education. Other families may have financial help from grandparents.

If your mission is to save for your child’s education, here are three strategies:

1. Mortgage offset or savings account

Use your mortgage offset account or open a separate savings account (preferably with a high interest rate) and contribute a set amount on a weekly, fortnightly or monthly basis, topping up with any extra money such as a tax refund, work bonus or inheritance.

When you have sufficient funds saved up, you could move the money into a term deposit that earns a higher rate of interest. Alternatively, you could talk with a financial planner about investment options. It would be important to get financial advice based on your individual circumstances.

In Jenni’s case, her daughter’s school offers interest-earning savings accounts for this purpose.

2. Education funds and insurance bonds

Some companies offer education or scholarship funds, plans or insurance bonds designed specifically to save for education. They effectively operate the same way as managed funds, with your regular contributions pooled with others and invested into shares, property or other types of financial assets. There can be tax advantages to saving for education this way, however, they are a long-term investment with your money invested for a minimum of 10 years. Beware that some come with higher fees than similar financial products—make sure you check with your accountant or financial planner.

3. Education loans

Education-specific loan providers pay the school on your behalf when the fees are due, and you make regular repayments to pay them back. This can allow you to smooth your payments over your child’s entire private education, and in some cases even extend your repayments after your child has finished school. Keep in mind that these loans typically come with a higher interest rate than some other loans.

MyBudget can help you budget for school fees

Given the costs involved, for most families, private education is a balancing act. In order to know what you can afford and what’s sustainable, having a budget is essential. 

For help creating and organising your budget—or establishing a saving plan—MyBudget is here to help. Call us on 1300 300 922 or enquire online for more information.

Read more about budgeting, discover how MyBudget works, sign up for money tips on the MyBudget Blog or follow MyBudget on Facebook.

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