There is increasing recognition by the Federal government that Australian families need assistance in meeting the costs associated with their children’s education, but parents should not assume that the government help will make up the shortfall between what they can afford to pay, and what education actually costs.
Mr Matt Walsh, head of Lifeplan Funds Management, says that financial advisers are well-placed to assist clients in building up the funds needed to pay for the kind of education they would like their children to have, as part of a holistic strategy.
“Over the last 15 years, education costs have risen 120 percent compared to just 47 percent for headline inflation figures.
“The latest Consumer Price Index (CPI) figures, which many commentators have labelled ‘soft’, mask the fact that education costs in the last year alone have risen by 5.7 percent (tertiary education 5.9 percent; secondary education 5.7 percent; and preschool and primary education 5.1 percent).
“This increase is beaten only by alcohol and tobacco (8.7 percent) and – just – by housing (5.8 percent).
“This continued erosion of education affordability is something that most people won’t have considered when looking at their financial plans. Year after year, the cost to families of educating their children has outpaced overall inflation as well as wages growth.
“We hear a lot about housing affordability, especially in our big cities, but the long-term impact of education affordability slips under the radar.
“When you consider how much energy and planning people put into saving for a house, the lack of forethought and effort put into saving for their children’s education is concerning.
“The last thing that any parent would want to do is pull their children out of a school because they can no longer afford to pay the fees, but increasingly that is a situation that many parents face.
“We know that the number of schools seeking the services of debt collectors is increasing.
“Parents just can’t afford to be complacent about paying for their child’s education. The government’s assistance will help slightly, but not enough to rely solely on.
“Many parents are unprepared for the long-term costs that come with providing the kind of education they want for their children.
“We need to start looking at the example set by the US where families now save for college and tuition fees from the moment their child is born.
“Every Australian family should consider its own education savings plan. It’s dangerous to ignore more than a decade of escalating costs without taking action.
“Any plans to help children with a deposit for their first home, or their first car, are nice in theory, but the reality is that a good education is far more valuable.
“Now is an opportune time to consider an investment fund for education. Asset prices are low, meaning a small upfront investment goes a long way over the long term. And a fund means that other family members, such as grandparents, can also contribute to future education expenses,” Mr Walsh said.
Lifeplan Funds Management is a specialist business of Australian Unity Investments. It is the market leader in investment and funeral bonds, and a leading provider of education investment funds. It has over $1.6 billion in funds under management (as at 30 June 2010).
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For more information please contact:
Matt Walsh
Phone: 08 8236 4706
Email: Matt.Walsh@lifeplan.com.au
