Private education is one way of providing your child with the best chance in life. But the cost of sending a child through 7 to 14 years of private school is daunting and unimaginable for most parents in the UK. This has not been helped by the significant increase in private education fees over the past decade, rising by almost 50%. In this article, we aim to explain how it is possible to fund this journey through private education using careful, calculated financial planning and long-term investments.

The average annual cost of a day-only private school in London is currently £18,750 . On top of the total average cost of raising a child from birth to the age of 18 in the UK, amounting to £202,660 according to The Times (including housing and childcare costs), these fees seem like an extortionate amount. A child attending private school for the full 14 years would more than double this cost.

However, according to the Independent Schools Council, the 600,000 children attending private institutions in the UK currently amounts to around 5.8% of the school student population, a record number since the Council records began in 1974. Not all of these are the children of millionaires and royalty, so there must be a way to fund this investment without needing large amounts of expendable wealth.

Constructing a financial plan as early as possible is the most effective way to efficiently fund private education. The most common method adopted is to start saving once the child is born, building up a pot of money for up to a decade before their first day at an independent school.

There are several different investment approaches available for this savings process:

1. ISA: An ISA allowance grants up to £20,000 per year in tax-effective contributions, useful in providing an annual grant for the fund.
2. Trusts: These offer the chance for family members to donate money to a fund in the form of gifts that trustees then hold on behalf of the child. This is a simple, tax-efficient way of building up a fund to use for the child’s future, with the trustees solely responsible for withdrawing money.
3. Gifts: An even simpler method is for grandparents and other family members to make regular payments to a child as gifts, often bypassing the reach of inheritance tax.
4. Offshore Bonds: These offer annual 5% tax-free withdrawals. The bond can then be switched into the child’s name at 18 to take advantage of their lower tax rate.

However, by simply making regular deposits to a savings account, you could be missing out on the possibility of significant capital growth and the chance to reduce the burden on your financial contributions. An alternative method that allows these contributions to grow is to invest money into stocks and shares. This route does carry more risk and requires forward thinking in a long-term investment plan. However, the returns from stocks and shares investments consistently exceed cash savings.

Whether you are deliberating which method to adopt for funding private education, or are still unsure if you will be able to afford it, a financial advisor can help guide you through the key decisions and questions, and create a long-term plan for the future of your child. The right investment approach will be distinct to your financial situation, and advice from an experienced professional will be tailored towards choosing the best long-term option for you and your child.