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It’s natural to want to invest heavily in your child’s future, but the cost of supporting them through their school days and university, especially if you’re looking to send them to an independent school, can be quite daunting. Whilst paying for private education can be seen as the best way to set your children up for future success, it is critical to understand the true cost to ensure that your ambitions are achievable and family budgets are manageable.
Can you afford to go private?
There is no perfect guide to what private education might cost. Many factors including the school itself, its location in the UK, whether your child will board, full-time, part-time or attend day school, and most significantly the age at which you choose to send your child to a private school, all determine how much you’ll be paying.
As a guide, a 2023 Schools Fees Report1 shows the cost of private education has soared with the average cost per child at a UK private school now £20,480 per annum (£6,827 per term) for day pupils, and £34,790 per annum (£11,597 per term) for boarders, with Brighton College currently being the most expensive school at £64,920 per year.
The biggest increases in fees for day pupils were in Scotland and London where fees rose on average by 6.77% and 5.93% respectively. The smallest fee increase was in the South-East, where fees for day pupils have increased by 4.21%.
As in previous years, the average cost of private school is still much higher in London and the south than elsewhere in the UK. The latest analysis shows the average yearly cost for a day pupil attending independent secondary school in London to be £23,249, compared to £15,516 in the North-East.
The fees aren’t the full picture
There are a wide range of additional costs that parents need to take into account when considering the true cost of sending their children to an independent school. On top of the yearly fees, the costs of uniforms, school trips, school meals, transportation, holiday clubs, sports and musical equipment and additional tutoring can add up to many thousands of pounds per year. Allowing for these in your financial planning is crucial.
Is private education worth it?
The independent schools sector continues to grow steadily. The latest figures from the Independent Schools Council show a record 554,243 pupils at 1,395 ISC member schools, up from 544,316 in 2022.2 For many parents the decision to put children through the private school system is based on a wide range of factors including top-tier academic achievement, a focus on the holistic development of the child, access to state-of-the-art facilities, and the wider range of extra-curricular activities that can open doors to new and diverse experiences.
If you’re fortunate to have the choice between a state or private education, only you will know what’s the best fit for your child. Both have pros and cons, some apparent from the outset, others which may take years to be revealed.
Infographic
Click the image to see the cost of private education.
Can I afford it?
To help you calculate how much you’ll pay in fees during your child’s school life, the website School Fees Checker provides a useful calculator. Depending on when your child goes to private school, it will be important to factor in annual inflation to ensure your sums are realistic.
How can you mitigate the costs of private education?
With careful planning, it’s possible to give your children an excellent education without placing undue stress on your finances.
According to the Independent Schools Council, approximately one-third of children educated at private schools receive some form of financial assistance such as a scholarship or bursary.
The value of this help totals over £1.2bn, an increase of 5.9% on last year, helping a total of 183,434 pupils with their fees. A significant majority (80%) of total fee assistance is provided directly from the schools themselves of which just under half is means-tested.
With careful planning, it’s possible to give your children an excellent education without placing undue stress on your finances.
7.1% of pupils (39,358) in independent schools are in receipt of a means-tested bursary, with the average such bursary worth £11,807 per year and just 1.74% of those in private schools (9,620 pupils) are in a position where they are paying no fees at all.
Some schools publish the income threshold for a family to be considered for means-tested bursaries. As an example, St Paul’s School in West London will consider any applicant with a combined family income of less than £126,000.
Many independent schools will offer tailored options for paying school fees including small discounts for paying fees in advance. This is made possible because early payment of fees means a school can take advantage of charity tax relief. Children of armed forces personnel also get discounted fees at many private schools.
A key decision that can make private education more affordable is deciding at what age your child will attend a private school. Will it be right from the start of their education at the age of four, later at seven, when they enter secondary school at 11 or only to study A levels in the sixth form? If you live near an outstanding primary school or state grammar, then delaying the cost of private education until your children are older can make a huge difference to your finances and the pressure this brings.
Further education, further financial commitment
For many parents, supporting their children extends into their university years. Time as a student is often described as the best three years of your life but it’s also an expensive time. The rising cost of university means that many students face graduating with enormous levels of debt.
Students can of course apply for tuition fee loans and maintenance loans which they won’t have to pay back until after their course. Repayments on these student loans only kick in when the graduates start to earn more than £25,000 a year3(£27,660 in Scotland4) but having tens of thousands of pounds of debt hanging over you can be disheartening.
Many parents will want their children to leave university debt-free to give them a head start in life, but if you haven’t factored the true cost of university into your financial planning you might not be able to make the contribution you’d like.
Many parents will want their children to leave university debt free to give them a head start in life.
What does a three-year university course typically cost?
Like private schools, there are a lot of variables that impact the costs of studying at university. Whilst tuition fees for the majority of students are £9,250 a year, living costs and accommodation costs vary considerably depending upon where in the country you study, your personal circumstances and lifestyle. In the latest annual National Student Money Survey5, the average annual cost of living across the UK is £12,936. If we take the two figures and apply them to a three-year degree, this adds up to costs of around £66,560 to go to university in the UK. This breaks down to about £22,185 a year.
But this figure could be higher if you study for example in London, where accommodation costs in particular are significantly higher than the national average.
A study by Imperial College London6 suggests the average costs in London over a nine-month period could be as high as £17,000. On this basis, the overall costs of attending a three-year university course in London could exceed £79,000.
How do you fund your child’s education?
In broad terms, funding of private school fees or support for the costs of attending university will come from four sources – from a lump sum such as an inheritance, from their income, from grandparents, or from proactive savings and investments that are planned early – often before a child is even born.
Although the fees can be daunting, the key to making it happen is to do your homework and start planning as early as possible.
For example, investing £600 a month from when your child is born until they reach 13 will build up a pot of £120,000 (based on 4% compound interest after fees). At a school charging £24,000 a year, this could cover the costs until your child reaches the age of 18.
Although the fees can be daunting, the key to making it happen is to do your homework and start planning as early as possible.
Where should I invest? – stock market vs cash?
Building up such significant sums through savings or investments is a long-term challenge.
One option is to use your annual ISA allowance, which means you can save up to £20,000 a year before tax or £40,000 if you’re a couple. Changes announced in the UK Spring Budget in 2024 are to launch a new British ISA to encourage investment in UK companies. Through this, you will receive an additional £5000 allowance on top of the current £20,000 – or an extra £10,000 as a couple. However, putting money into a savings account, or a cash ISA, may not deliver the best returns.
Although the stock market is volatile, history shows that over periods of ten or more years, it tends to perform more strongly than cash and grow above the rate of inflation. By investing over the long term, you could help your money work harder for your child’s future.
If you’re considering setting up a separate investment portfolio for them, the benefit is in taking a long-term term approach, so the earlier you can start, the better.
How grandparents can help with school fees
With a little foresight, well-off grandparents can relieve the financial burden on their grown-up children by contributing to their grandchildren’s school or university fees. This generosity has the added advantage of helping to reduce potential looming inheritance tax (IHT) liabilities.
Gifting is another tax-efficient way for grandparents to help out with the rising costs of education. Everyone enjoys an individual annual ‘gift allowance’ of £3,000, so as long as the gifts remain below this threshold, they are free of IHT liability. There are also opportunities to make larger IHT-free payments, on condition that the grandparent lives for at least seven years after the gift has been made.
Another effective strategy involving grandparents worth considering is to set up a bare trust. In a bare trust, assets are held by a trustee (the grandparent) for the benefit of the beneficiary (the grandchild). The assets are taxed as if they belong to the grandchild, meaning that the grandparents can take advantage of the grandchild’s personal tax allowance.
Gifting is another tax-efficient way for grandparents to help out with the rising costs of education.
A bare trust can also work well when it comes to tax-efficient school fee planning. Grandparents’ contributions to the trust will not incur any IHT liability and are instead taxed using the child’s allowances, provided they survive for seven years from the date of paying into the trust. This is important to consider as tax would fall to the parents if the contributions were a gift directly from them. Bear in mind, however, that the child is legally entitled to take control of the funds in the trust when they become an adult. This happens at the age of 16 in Scotland and at 18 in the rest of the UK.
Get financial planning advice
When you become a parent, it changes everything. Your priority is to ensure your children’s future well-being and success. Given the wide, and sometimes bewildering, range of savings and investment products available for school fees planning, parents would be well advised to get some advice to identify the approach that will best meet their individual needs.
At Investec Wealth & Investment (UK), our highly experienced financial planners are on hand to help you navigate your options, taking the time to understand your goals and priorities – working with you to build a plan to help you fund your children’s education.
To start an obligation-free conversation, jump down to our enquiry form.
Footnotes
- Schools Fees Report, School Fees Checker
- ISC Census and Annual Report 2023, Independent Schools Council
- Plan 5 student loan repayments, www.gov.uk/repaying-your-student-loan/whatyoupay
- Scottish Government's Repay Your Student Loan, www.mygov.scot/repay-student-loan
- How much does university cost, National Student Money Survey
- Imperial College London
* This figure is calculated using average annual school fees from Year 1 to Year 13, increasing 6% per year considering potential annual fee increases and inflation.
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Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.