Preparing for your children’s education is vital. A well planned Education Fund for your child can provide them with the best start in life. There are fewer better investments than in your children’s future. Higher education is consistently linked to higher long-term earnings. For example, the average salary of Oxford Business graduates is £74,100 five years after graduation (The Telegraph).
As a parent, you have the advantage of being able to save for this goal in advance. This way, harnessing the power of equity growth (stocks and shares) and compound interest. Needless to say, though, saving for your children’s education is a problem that needs addressing early. Without a structured commitment to save, it is unlikely you will be able to provide the education options they require. The fees of sending one child through private primary school, private secondary school and university can easily exceed £0.5m.
The international environment pushes them out of comfort zone. They can develop a more global outlook and a diverse range of friends. The downside of moving abroad is that you have removed your children from a high-quality English education free at the point of use. There is also no UK student loan available to your children. The ‘all-inclusive’ expat contracts of the 90s, where your employer paid all your relocation, education and family travel costs are no longer standard practice. Employers are still offering fantastic salary packages, but you need to look after your own family.
An advantage of moving abroad can be a higher salary with a lower cost of living — the best of both worlds. China is an excellent example of a lower cost of living. However, a lower cost of living does not guarantee lower education costs for your children. Expats soon realise how international education costs can be more expensive than even the most prestigious private schools in the UK.
Expats face a decision of either sending their children to an international school or a state-funded local school. International schools typically follow the curriculum of your home country on core subjects such as science, English and maths. Allowing children to re-integrate back into higher education in their home country quickly.
State schools are typically in the local language and will follow the provincial curriculum. There are obvious pros and cons of International schools over local schools. International schools are expensive, but in theory, provide a higher quality of education. Local schools are inexpensive or possibly free but are unlikely to teach in English.
A platform investment provides more online accessibility including the ability to place trades online. This speeds up the process of buying and selling assets.
For some expats, the decision of international school vs local school is out of their hands. Firstly, good local schools in expat areas are highly oversubscribed, and places awarded to home students over international students. Secondly, 35% of all Chinese schools are run privately, with 53.7m children enrolling into private schools every year (China Daily, 2019).
Saving for your children’s education is a difficult task. By investing consistently over time though, you can make this task far more achievable. It can be accomplished by using the longterm upward trend of global equity markets to take some of the pressure off you. Stocks and shares can go up as well as down. Over the long-term, they have always provided a positive level of growth that far exceeds cash holdings.
Saving £750 per month once your child is born (with a net annual growth rate of 5%) would provide your child with an education fund of £259,997 on their 18th birthday. The best part of the investment decision, though is that only £162,000 would have been your own contributions. The remaining £97,977 is from the growth of the portfolio over time. Broken down into percentages, you would only be paying 62.3% of your children’s future education funding. The growth of the equity markets would pay for the other 37.7% of their education funding.
If you started saving at ten years old, you would be able to provide your child with an education fund of £88,252 on their 18th birthday. With your contributions being £72,000 and the investment growth £16,252. Broken down into percentages, you would be paying 81.6% of your children’s costs. With only 18.4% being paid for by the growth of the equity markets. This growth highlights the importance of starting and planning early.
Formal higher education has a proven track record. However, entrepreneurship is a growing trend in the digital age. It is difficult to know at a young age what interests, skillset and motivations your child will have. Your child may well decide to follow a business start-up instead of a more formal education route.
Many of the most successful entrepreneurs did not have advanced degrees. Including Bill Gates, Mark Zuckerberg and Steve Jobs (Business Insider, 2019). Richard Branson did not follow a formal education and recently remarked how entrepreneurial drive beats a fancy degree anytime (Forbes, 2019). Whatever path your children may choose an Education Fund can help your children achieve their full potential.
An Education Savings Plan is valid for any form of higher education costs. They are not fixed to an individual schools or country. No restrictions mean you and your children are free to decide which university best suits their requirements. When the time comes the capital will be there to support them. Withdrawals can be made to any bank account in your name anywhere in the world.
The majority of expats move employer or country several times in their career as new opportunities arise. All Educations Savings Plans we offer, provide full international flexibility. This flexibility ensures you can continue contributing to your children’s education savings irrelevant of changes in your life. This consistency is key. Compared to breaking the pattern of saving by opening and closing local bank accounts every time you move country.
You generally have 18-years to save and invest for your children’s university funding. This time provides a massive opportunity for the equity markets to help grow the value of your portfolio. Easing some of the pressure off your contributions. Equity markets returns are not guaranteed, but historically they always outperform cash.
You can use your children’s education savings plan to help teach your children the value of money and saving. From the age of 12, you can engage your child in the project. Explaining how much you are saving, where the money is invested, and what the investment growth has been. It educates them on the habit of saving and helps them value the education opportunities you are providing them.
There is a range of Education Savings Plans available. Some offer large flexibility on how much you save each year. Others have a set agreed amount to save each year. A fundamental similarity between them is that you will need to be committed. You will also need to save consistently if you want to achieve your goal. Investors should not take Education plans light-heartedly. It is a commitment to your children’s future, and you may incur penalties should you break the policy guidelines.
An Education savings plan is not fixed to a specific university; they are flexible. Unless you create a child trust fund to hold capital until they reach eighteen, you will ultimately have access to the capital. There may be life events which make you want to dip into the funds to pay for something else. Withdrawing money is a personal decision usually taken with your partner. It is vital to ensure this capital is replaced not to impact your children university funding.
There is also the problem that the cost of education is increasing eight times faster than salaries (Forbes, 2019). You will likely find that the costs of education have increased significantly over the 18-years. However, saving in advance will always put you in a stronger position.
In case of your death, your partner may not be able to continue the monthly contributions. Your death means your child may not receive the education funds they need. You could consider an insurance policy to cover your obligations. These could include mortgage payments and education payments in the event of your death.
Private School Fees are generally expensive for expats anywhere in the world. The cost of international private schools can outstrip even the most famous British boarding schools such as Eton College or Winchester College. Despite the cost, Private School Fees can be a valuable investment. Your child has access to a world-class education and extra curriculum activities not accessible in a state-funded school.
Moreover, the boarding fees allow your children to forge natural relationships and networks within their cohort. These friends can be useful contacts and connections throughout their career. For example, employers fill up to 80% of company positions through informal networking rather than being publically listed (Business Insider). It is a well-known fact that career progression often depends on who you know rather than what you know.
With a considerable number of expats living and working in Saudi Arabia, private schools are well established. Jeddah Private International School is one of the leading private education institutions. The annual tuition fees for Kindergarten are SAR 25,000, Elementary SAR 37,800, Middle SAR 41,000 and High SAR 47,500. If you were to have more than one child studying at the same time, the annual costs would be significant. Having an education fund in place to meet these obligations is essential.
An Old Mutual Education Savings Plan is a means of saving money every month towards your children’s education. It is not a standard deposit saving account like a bank. Your monthly contributions are typically fixed and cannot be reduced or stopped without facing penalties.
Some investors prefer this structure. The adverse penalties act as an incentive to prevent them from wavering on initial commitment to save. The penalties can be a motivation in hard times. Mainly when it would be easier to stop saving and re-direct the money somewhere else.
A structured savings plan can provide excellent long-term results. Specifically, in a situation where you continue to move forward in your career and salary. However, an Old Mutual Education Plan surrender can destroy the value of your education plan. The impact on value is because the programs are designed for long-term investment, and you are breaking the agreement early. Surrendering your Old Mutual Education Plan could eat into your growth and also part of your original investment. There is a risk you could receive back less than you originally invested.
Freedom over your contribution levels allows you to change or even stop your contributions at any time without facing any penalties. These types of plans do not offer any bonuses as you have maximum freedom. A platform education savings plan is suitable for an investor who wants to save towards their children’s education but without contractually commitment. They may be uncertain over their employment or want the option to access to the capital for other purposes that may arise before their children’s education.
A commitment to save a certain amount per month over a fixed period towards your children’s education. Ie., £750 pm over the course of 18-years. You commit to save, and you cannot just stop contributions or close the plan early without facing penalties. Structured education savings plans offer bonuses to investors for a long-term commitment. However, this structured investment needs to be fully understood. Advisers argue there is a higher chance of you sticking to your original goal to avoid penalties. However, life could change, and the plan may no longer fit your requirements.
Our Financial Advisers have advised clients in numerous countries in sending their children to Universities all over the world. They look forward to helping you understand the Best Child Education Savings Plan for your children.
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The average time for a pension transfer is 3-4 weeks. Depending upon the type of pension with DB transfers taking longer and DC transfers shorter. In our experience, exemplary paperwork and streamlined communication are keys to faster transfers. Errors lead to longer transfer times. International SIPP transfers are generally quicker, while QROP transfers take longer.
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