How to start saving for your kids’ education

Giving your kids a good education is a priority for every parent, but it can come with a price tag. In fact, education costs can be one of the largest components of the cost of raising a child. A metropolitan public (government) school can cost parents around $90,000 across 13 years, while that figure balloons exponentially if you opt for a private education. However, that’s not to say that funding a quality education isn’t possible for your family. With some careful planning, you can factor the cost of your child’s education into your financial plan.

Estimate costs and time horizons

The first step in saving for your kids' education is to get an understanding of what costs you might be looking at. Do you plan to send your child(ren) to private or a public school? Will this be for their entire schooling, or will they begin in public and transition to private later? Do some research into the core costs that your decision may involve and then consider the fringe costs. Trips, camps, equipment, uniforms and extra-curricular activities all add to the cost of education.

Then, consider your time horizon. When do you need to start paying for these costs? Do you have several years to build up a nest egg, or will this be a more immediate decision? From here, you begin painting a picture of the costs you’re up against.

Break it down into regular contributions

Once you have an idea of costs and time frames, you can start to break it down. If you’re looking at a longer time horizon, you might decide to set aside a certain amount each month to build up into a larger sum over time. If, for example, you want to save $150,000 for private high school fees in 10 years time, that works out to be $1500 per month across 10 years.

Alternatively, if you’re looking to fund a child’s education in the nearer future, you might look at how you can cashflow fund the fees. This might look like building it into your regular household budget if your income allows or looking at ways to generate additional income to cover the cost. Work out what the annual fees might look like if you paid for them monthly, and see how that stacks up against your budget,

Decide where to save or invest your money

Once you’ve decided how much you’ll be setting aside, you can consider where you might hold your money. For shorter term goals, you might choose a high interest savings account to earn bonus interest each month. The Bendigo Bank Reward Saver offers bonus interest each month that you add to your balance, which might be suitable for those growing an education fund over the long term. Equally, longer term time horizons might mean you consider investing your money in something like a managed fund. This can provide diversification with access to a range of assets (such as shares, property etc) to potentially deliver strong long-term growth.

Holding lump sums

Your strategy to save for your kids’ education may involve holding lump sums, for example inheritances, bonuses or gifts from family members. In this case, term deposits can offer consistency and certainty around returns, which may be of value if you plan to use the funds in the short to medium term.

Ultimately, preparing to fund your children’s education comes down to your own personal situation, values and goals. The earlier you plan ahead, the more options you’ll have to choose from when the time comes to make the decision.