This article is a brief introduction to saving and investing for private education.
It is not intended to be financial advice specific to your particular circumstances.

Saving for Private Education - Tax Efficiently

You are familiar with the basics of savings: the more you save and the sooner you save it, the bigger the savings pot will be when you need it.
 
So, if you want to send young Thomas to… Thomas’s… and you’re not planning on relying on grandparents or others to fund it, then the sooner your start saving, the better. But you probably already knew that.
 
Rather than focus on ‘how much’ you should save each month/year – which is going to highly dependent on your unique circumstances – let’s focus on how to structure those savings.
 

• ISAs – Money within ISAs grows tax-free and so is often the best starting point for any sort of savings including private education.
• Offshore Bonds – This is a more complicated structure but can be extremely useful because investments within Offshore Bonds grow free of UK tax – and also, crucially, because the gains from the investments can be taxed at your children’s tax rate (which is usually lower than your own).
• Bare Trusts – This is one for grandparents or other family members who wish to create an ‘education fund’ (parents cannot use them). Bare Trusts can be extremely tax-efficient as, again, the child is the taxpayer and therefore usually pays either no tax or a lower rate. 
• It's worth mentioning that there are a variety of other strategies for grandparents or others looking to pay school fees - and many of these strategies can also reduce potential inheritance tax.

Investing for Private Education

It can be difficult to decide the investments that one should make for an ‘education fund’. In general, one has to take more risk in order to generate a higher return but we’re talking about your children’s education – so you probably don’t want to take too much risk.
 
The best way to think about this is to consider the timeframe. If you need the money in the next few years, a savings account or Premium Bonds is almost certainly your best bet.  If you’re planning for school fees in ten or more years, the argument for owning stocks is usually very strong. The trickiest part is usually managing the 2-10 year timeframe – and there is no absolutely correct answer. Much depends on your circumstances – for example, the ability to take out a bigger mortgage gives you more cushion to take investment risk (all else being equal). 

Protecting your ability to fund Private Education

For many families, private education is a major priority. When the funding for private education comes from your own income – rather than, say, generous grandparents – you may want to protect your ability to pay. What if something tragic were to happen to you or your spouse?
 
Many employers automatically provide insurance that would pay out a lump sum and/or an ongoing amount in the event of you suffering a serious illness or passing away. Unfortunately, however, typically the insurance would not replace all of your income – which means you (or your surviving family) may no longer be able to afford private education.
 
It might be a very good idea to take out some form of life and/or serious illness insurance. Some insurers even offer insurance that will specifically pay for private education. Creating a policy that would pay a lump sum plus pay for private education for your children isn’t that expensive* – and would ensure your children’s education is not imperiled.
 
*the cost is dependent on your particular circumstances, including your age, your health and whether you’ve ever smoked – but the cost of a relatively large insurance policy is often £100-£150 per month.

​ If you would like to discuss this further
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​TindleWealth offers all-encompassing financial advice that includes, if you wish, planning for private education as well as every other financial aspect of you and your family’s lives.
 
Every initial consultation is free and most people learn something from this free chat even if they don't move forward - so please do get in touch if you think discussing this stuff might be helpful. Use the form below to contact us or reach out to Scott directly at scott@tindlewealth.com

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