DIPEN TANNA

QWe are starting to plan a savings pot to pay for future school fees. Can you advise on some areas to consider?

AEvery parent I speak to wants to give their children the best education – and often this also extends all the way to wanting to assist with the increasing cost of university.

Everything you save is going to need to work very hard. The average cost of school fees per child is now £20,480 a year for day pupils, and £34,790 a year for boarders (source: Schoolfeeschecker 2022). It is prudent to factor in at least 5% fees increase per year, plus other expenses such as school trips and uniforms. A good rule of thumb is to build in an additional 10% per year. The scale of fees and commitment can seem daunting, but private education can be a ordable provided you plan properly and give yourself as much time as possible to save. Here, financial advice can be useful in helping you to make the right choices about the most tax e cient way to achieve your goals.

In general, parents looking to fund school fees fall into three camps: those who have a lump sum to invest; those who can pay from their income and parents who are planning ahead. Building the kind of capital you need is best done over a number of years. One such option is using your annual ISA allowance, which means you can save up to £20,000 a year before tax – £40,000 if you’re a couple. Once you have used your ISA allowance/s, you can also save up to £9,000 into Junior ISAs a year for each child.

However, putting money into a savings account, or a cash ISA, is unlikely to give you the returns needed. Investment in stocks and shares, including Stocks and Shares ISAs, provides the potential to outperform cash holdings, especially over the medium to long term. Like all stock market investments, it can carry more risk, but has the potential to give greater growth over time.

Points to note are that the value of any investment will be directly linked to the performance of the funds selected and the value may fall as well as rise. This means you may get back less than the amount invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank, building society or a Cash ISA. Also remember that the favourable tax treatment given to ISAs may not be maintained in the future if there are changes in tax legislation.

In considering your options, taking expert financial advice is a wise move to determine what level of risk you feel comfortable with. Doing your homework and seeking out trusted, expert advice from a financial advisor is always the key to long-term investment success. And what better investment could there be than in your child’s future?

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, email Dipen.Tanna@sjpp.co.uk