Contents
Acknowledgements
Foreword
Preface
1: Education — never more important than today
Why is education important?
The trend from private to public ... and back again
Schools may change, but not the value of education
A snapshot of the costs
Educate the kids or buy a house?
Like all good investments, long-term planning is the key
The three Rs of investing for education
Key points
2: Thinking through the choices
The three Cs of selection
Factors that shape our choice
Exploring your options
Private versus public
Single sex versus coeducational
Alternative approaches to education
Applying for a place
Key points
3: Capital punishment... a closer look at the costs
Estimating the cost
Extra marks for saving early
Pay for school or save for university?
Six steps to saving for schooling
Key points
4: Scholarships, bursaries and other low-cost options
Dollars for scholars
Selective schools
Opportunity classes
Gifted and talented programs
Key points
5: Freeing up money for education spending
Take the ‘mort’ out of mortgage
Trim the interest tab
A ‘super’ idea
Key points
6: A personal project — investing directly
Is a financial planner necessary?
Getting started
Investing in cash
Investing in fixed-interest debentures
Investing in shares
Mix ‘n’ match — the benefit of diversification
Whose name to invest in?
Key points
7: A class act — investing indirectly
Why invest in a managed fund?
Key features to look for in a managed fund
Choosing a fund
Look beyond past returns
The impact of tax
Investment bonds
Education savings funds
Key points
8: Help is available!
Commonwealth Government entitlements
State- and territory-based payments
Key points
9: Off to school and into the red
Using debt to pay school bills
Putting it on the house
Borrowing to invest
Gearing through margin loans
‘Drip-feeding’ a portfolio
Avoiding the downside
Key points
10: Beyond the school gate
School’s out — what next?
Making plans — options for school leavers
Government support for students
Key points
11: Surviving uni
Which university?
The cost of a degree
‘Buying’ a degree
The shape of things to come?
Savings scenarios — some starting points
Scholarships
Student accommodation
Commercial student loans
Key points
12: A final word
Appendix A — Useful resources
Appendix B — Summary of saving and investment options
Index
Also by Nicola Field
Baby or Bust: financial planning for new parents and parents-to-be
First published 2008 by Wrightbooks an imprint of John Wiley & Sons Australia, Ltd
42 McDougall Street, Milton Qld 4064
Office also in Melbourne
© Nicola Field 2008
The moral rights of the author have been asserted
National Library of Australia Cataloguing-in-Publication data:
Author: Field, Nicola.
Title: Investing in your child’s future : financial planning for your child’s education / Nicola Field.
Publisher: Richmond, Vic. : John Wiley & Sons, 2008.
ISBN: 9780731407682 (pbk.)
Subjects: Finance, Personal.
Saving and investment
Parents–Finance, Personal.
Child rearing–Costs.
Education–Costs
Dewey number: 332.02401
All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.
Cover design by Mike te Wierik
Disclaimer
The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.
Acknowledgements
Writing a book is like a major renovation project. Both are hard work, both call for a healthy dose of patience from everyone in the family and both are equally rewarding. The key difference is that manuscripts have a completion date.
It’s ironic that Investing in Your Child’s Future was written from our turn-of-the-century schoolhouse in the New South Wales Hunter Valley. Built in 1913, we still unearth old rulers and inkwells in the course of our home improvements — artifacts that serve as a powerful reminder of the enduring nature of education.
Combining motherhood with writing a book amid a substantial renovation project (one that will hopefully be completed before humans colonise Mars) is a three-way juggling act, and one I could only have managed with the help of my family. Special thanks to my rapidly growing brood — Alex, Chris and Kate — who helped out in lots of little ways, and to my better half Michael, for his enduring patience and support. My thanks also to Robyn Terrell who so generously gave her time to entertain baby Nicholas while I bunkered down in the office.
As always I’d like to thank my assistant, Karen Orr, for her valuable input, and the entire team at John Wiley & Sons for their professionalism and support.
My thanks also to Pam Walkley, editor of Money magazine, for taking the time to pen the foreword.
Thank you to David Reid at Andex, Phillip Gray at Morningstar and the team at Lifeplan Funds Management for supplying valuable research data.
Finally, I owe a debt of gratitude to all those parents who contributed to this book by sharing their ideas, experiences and strategies for their own children’s education. All parents wonder if they’ve made the right decision for their child, and with a bit of research, planning and thought, at least we can say we gave it our best shot.
Foreword
Australian families have plenty to contend with when it comes to money matters, and during my nine years at the helm of Money magazine I have received thousands of letters from readers asking for help with all sorts of financial issues. One of the recurring requests is from parents looking for ways to meet the costs of their child’s education.
There is no doubt that paying for schooling can be a financial challenge — especially at a time when housing costs and fuel prices are rising, and we are being urged to set money aside to fund our retirement. It all adds up to a significant drain on the family budget. My own children are adults now, so we no longer face the burden of education expenses, but I can certainly sympathise with parents battling to pay school costs to give their children a good head start in life.
With the benefit of experience I can also say that providing your children with an education that brings out their best is one of the greatest gifts you can ever give them.
Yet it is certainly not an easy task, and rather than sympathy, families are looking for sensible, easy-to-understand advice on managing the costs of education. Fortunately, this is just what Investing in Your Child’s Future is all about — simple, effective strategies for saving and investing discussed in straightforward language.
There is no single answer to meeting the costs of schooling. However, by adopting the long-term approach that Nicola Field recommends, parents can plan ahead and prepare for school costs while still enjoying those precious years when their children are young.
Investing in Your Child’s Future is essential reading for parents struggling with, or just beginning to think about how they are going to pay for, education expenses. It is also a great book to share with other families — take it along to dance class, to soccer training or to piano practice. If you are interested in paying for a decent education for your children, chances are other parents you know will be too.
Pam Walkley
Editor, Money magazine
Sydney
April 2008
Preface
Parents are made of tough stuff. We have to be — how else would we cope with those nine nail-biting months of pregnancy and the nerve-racking prospect of labour? And just when we think the worst of the worry is behind us we dedicate ourselves to the patience and toil of raising our children from newborn to preschooler.
However, our real resilience often comes when the kids head off to school. In order to meet a growing mountain of school costs, many parents, and even grandparents, are sacrificing their own lifestyle to give their sons and daughters a sound education. It may mean driving a clapped-out car rather than the latest showroom head-turner or downgrading annual holidays from a trip to the Costa del Sol to a few nights at the Costa-not-a-lot. But we do it all without as much as a backward glance.
The trouble is, sacrifice alone may not be sufficient to meet today’s — and tomorrow’s — school costs. As a growing number of families leave the public system in favour of private schools, parents across the board are faced with mounting education bills — costs that occur again year after year. And for some families it doesn’t end with high school. Many parents and grandparents are also keen to help fund their child’s tertiary education.
Simply hoping it will all work out is no plan of action. Indeed, this sort of approach can see parents lumbered with increasing high-interest debt, all in the name of trying to help out the kids. Yet a private school education does not mean that both parents have to work themselves into the ground, leaving little time or energy to have fun with their children. The solution to meeting the costs of education lies in careful planning and taking a long-term approach.
This book is designed to help parents shape those plans — from choosing the appropriate school and school system to laying the foundations of a saving regime that can go a long way towards meeting the costs of education. Of course, all families are different, and Investing in Your Child’s Future is designed to provide an overview and food for thought. So if you are looking for personal financial advice, you will need to consult a financial planner.
I invite you to read this book and, as much as possible, share your thoughts and decisions on schooling with your children — after all it is their future that you are planning.
Simply by picking up this book and turning the pages you are showing that you care about your child’s education, and from one parent to another, I wish you all the best in the journey of investing for your child’s future.
Nicola Field
Hunter Valley, NSW
April 2008