When I want to buy a new car, the array of buying options open to me are as bewildering as they are vast. I can buy outright, take a personal loan, or choose from a range of contracts including hire purchase, PCP and leasing.
Only one method will lead me to ownership immediately.
The rest involve a long-term arrangement that can take many years until I have a car of my very own at the end of it. And the payments often erode the overall value, so you end up paying more than the car is worth.
It’s the same with living arrangements. In 1960, the average age of a first time buyer was 23.
Today it is 30, with a larger number of people renting for many years. Again there are a number of ways to purchase these days, including Shared Ownership Schemes, which means that many of these first time buyers are unlikely to own the whole property for many years.
So what, I hear you cry, has this got to do with school fees planning?
I guess the point I want to make is, do you want your clients to provide a debt-free future for their children after education?
Or will they, or their children, be paying this debt off for years to come?
That could hamper their future lifestyle and potentially take years to clear.
I heard a story the other day about a graduate who did not take two promotions in their workplace because it would have taken them above the threshold where they would need to start repaying their student loan.
It’s a ludicrous situation to put yourself in, and potentially harms the career you spent so many years studying for.
From 6 April 2019, once a student in England or Wales earns more than £25,725 (Plan 2) or a student in Scotland or Northern Ireland earns more than £18,935 (Plan 1), then they must start to repay their student loan.
Above the threshold, they must pay 9 per cent of their income – which can include employed, self-employed, or rental income, and can also include savings interest, pensions or investment income if this exceeds £2,000.
The ideal situation for most parents and grandparents is to provide the funding to allow their child to go through the best education system they can afford to give them the best start in life. But before we get to funding, let’s first examine the costs of private and further education.
Private education costs
If your clients want to secure a private education for their children, the costs can be quite staggering.
Eton, for example, the educator of no less than nineteen Prime Ministers, costs £28,000 per year. On average, according to the annual census of Independent Schools Council, the cost of private education in the UK is £15,000 per year for day pupils and £33,000 for boarders.
Further Education costs
First things first – the course fees. Universities in England, Northern Ireland and Scotland can charge up to £9,250 per year. Welsh universities can charge up to £9,000. For accelerated degrees, this can be up to £11,100.