Investing in your child’s education is one of the most significant and rewarding financial commitments you can make as a parent. The pursuit of higher education, away from home and potentially even in another country, not only broadens horizons but also opens doors to a world of opportunities.
But with international tuition fees, living expenses, and other associated costs on the rise, it’s important to put a financial plan in place, starting with the five guidelines we’ve detailed below – to help you support this potentially critical chapter of your child’s educational journey.
1. Set Clear Goals
Your first step is to set clear financial goals. Determine the approximate costs for tuition, accommodation and living expenses at your desired universities. Keep in mind that these costs may vary significantly by country and institution. Once you have a target figure, you can begin to plan.
2. Seek Advice from Financial Advisor
While you may have an excellent understanding of personal finances, consulting with a qualified financial planner will allow you to benefit from valuable insights and expertise. They can help you make informed decisions, navigate complex investment options, and optimise your strategy to create a tax-efficient diversified portfolio that aligns with your time horizon and your risk tolerance.
And because financial markets and personal circumstances can change over time, it’s important to review your savings and investment strategy with your advisor on a regular basis, to ensure that it remains aligned with your goals. This will also enable your financial advisor to adjust your asset allocation over time to reflect your investment horizon; de-risking and safeguarding the portfolio the closer your child gets to University age.
3. Start Early
Time is your most valuable asset when saving for your child’s education. The earlier you begin the process of building their education fund, the more it can benefit from investment growth and compound interest. Even relatively modest contributions, if made consistently and invested well over a long period, can accumulate into a significant sum.
3. Explore Tax-Efficient Accounts
Tax-efficient accounts [such as ‘529 Plans’ in the United States, ‘Registered Education Savings Plans’ (RESPs) in Canada, Junior ISAs in the UK, and International Savings Plans] have the potential to be an effective component of your child’s education fund.
5. Is Tax-Efficient Gifting an Option?
Dependent upon your and their circumstances, grandparents may want to assist you financially with your child’s education costs, as gifting ‘with a warm hand’ in this way not only enables them to see the benefit of their investment in their grandchild’s’ future, but also allows them to reduce the inheritance tax (IHT) ultimately levied on their estate, if they are UK domiciled.
Your financial advisor will be able to explain in more detail how these arrangements should be set up to optimise their tax efficiency and ensure that they remain outside the scope of IHT.
Your child’s education is an investment that lasts a lifetime. By starting early, utilizing tax-efficient savings and investment strategies, and seeking professional planning advice, you can support their academic aspirations and their chance to thrive on the global stage, without compromising your financial well-being.
Our international financial planners can help you successfully navigate this important aspect of your family’s financial future. We believe in taking a holistic approach to financial planning, which means considering your children’s education goals within the broader context of your overall financial objectives. By gaining a thorough understanding of your specific circumstances and objectives we can create a customised plan that not only funds your children’s international education but also aligns with your long-term financial goals. Contact us today to schedule a consultation.