If you are bringing up children, you might want to take a deep breath before reading this. Before the age of 21, they’ll cost you about £229,000 – and that’s if you send them to a state school. So how about private education? Brace yourself, because a day school would be another £222,000.
Save, save, save
You don’t need us to explain the importance of saving. But if you can, save early and save often. Cash savings accounts are low risk: there’s little chance you might get back less than you put in. But shop around for the best interest rates, because the spending power of cash is continually being eroded by inflation.
Lock it away
You might be better off putting money into a deposit account that is locked until a specific date. By tying your money up, you will probably earn a higher rate of interest than by putting it into an account that offers instant access. And it carries the advantage that you can’t withdraw the lot on a whim should you be tempted.
But think carefully about how much money you’ll need – and when – before committing yourself to an account that does not allow withdrawals for a fixed period.
Invest the rest
UK stocks have generated average returns of 5.1% a year since 1899, after inflation is taken into account . This is much better than cash. Of course, it doesn’t mean the stock market will behave similarly in future. But it gives you an idea of what financial advisers factor into their thinking when they recommend investments.
The ups and downs of investing mean it’s better suited to longer-term aims. If you can leave your investments alone for longer and reinvest the income generated, then – just as with savings – you’ll leave more time for compounding. (In other words, you earn income on your income.)
The education conundrum
Do you have to go private for the whole of your child’s school career? Choosing a good state-funded primary school for their early education will give you longer to save before you start paying fees. And remember, it could actually be cheaper to find a good state secondary school and move house.
Cash in on your clever child
Most private schools offer means-tested bursaries and scholarships, which can shave thousands off the cost of education. According to the Independent Schools Council, a third of private pupils receive assistance. Of course, you may end up shelling out for extra tuition to help your child prepare for the necessary exams. But this could pay off long-term.
University might seem a way off, but it’ll come round fast enough. Consider opening a Junior ISA to safeguard your own tax allowances, but be aware that your child won’t be able to make any withdrawals from it until they turn 18 (thankfully).