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  • FIRST POST
    • ameliab1909
    • By ameliab1909 11th Jul 17, 8:22 PM
    • 8Posts
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    ameliab1909
    Pay school fees in advance or invest money??!
    • #1
    • 11th Jul 17, 8:22 PM
    Pay school fees in advance or invest money??! 11th Jul 17 at 8:22 PM
    Hi there
    Am really keen to get some views on this..
    Got two sprogs in private school. The school are offering 2-3% discount for fees paid in advance (2 years fees = 2% off, 3 years 2.5% off, 4 years 3% off).
    We have got £117,000 which I think would just about be enough to scrape the 4 years and therefore attract 3% discount.

    My question is - would we be better investing that money or handing it over to the school???? I like the idea of not thinking about fees for 4 years! If we invest it there are tax implications I imagine and we need access to it at least once a year to pay fees (you can pay annually).
    Am feeling very confused and overwhelmed at all the options??? I see fixed bonds but they are only offering 0.75-2%.
    also worth mentioning that £88,000 of that £117,000 total was a remortgage and costs us £200 a month already. Paying most of it back is also an option????
    Any help/advice greatly appreciated..
Page 1
    • Keep pedalling
    • By Keep pedalling 11th Jul 17, 8:31 PM
    • 3,573 Posts
    • 3,844 Thanks
    Keep pedalling
    • #2
    • 11th Jul 17, 8:31 PM
    • #2
    • 11th Jul 17, 8:31 PM
    If you pay in advance what happens if the school folds for financial reasons? The discounts are not high enough to justify those levels of discount.
    • ameliab1909
    • By ameliab1909 11th Jul 17, 8:37 PM
    • 8 Posts
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    ameliab1909
    • #3
    • 11th Jul 17, 8:37 PM
    • #3
    • 11th Jul 17, 8:37 PM
    thanks for your reply. As far as I know the money is held in a protected scheme but its a good point and one I need to find out more about. Do you mean the discounts aren't high enough to pay lots of years up front?
    • Keep pedalling
    • By Keep pedalling 11th Jul 17, 9:11 PM
    • 3,573 Posts
    • 3,844 Thanks
    Keep pedalling
    • #4
    • 11th Jul 17, 9:11 PM
    • #4
    • 11th Jul 17, 9:11 PM
    thanks for your reply. As far as I know the money is held in a protected scheme but its a good point and one I need to find out more about. Do you mean the discounts aren't high enough to pay lots of years up front?
    Originally posted by ameliab1909
    Whoops! typo. Discount should read risk
    • BeatTheSystem
    • By BeatTheSystem 11th Jul 17, 9:21 PM
    • 142 Posts
    • 78 Thanks
    BeatTheSystem
    • #5
    • 11th Jul 17, 9:21 PM
    • #5
    • 11th Jul 17, 9:21 PM
    Hi there
    Am really keen to get some views on this..
    Got two sprogs in private school. The school are offering 2-3% discount for fees paid in advance (2 years fees = 2% off, 3 years 2.5% off, 4 years 3% off).
    We have got £117,000 which I think would just about be enough to scrape the 4 years and therefore attract 3% discount.

    My question is - would we be better investing that money or handing it over to the school???? I like the idea of not thinking about fees for 4 years! If we invest it there are tax implications I imagine and we need access to it at least once a year to pay fees (you can pay annually).
    Am feeling very confused and overwhelmed at all the options??? I see fixed bonds but they are only offering 0.75-2%.
    also worth mentioning that £88,000 of that £117,000 total was a remortgage and costs us £200 a month already. Paying most of it back is also an option????
    Any help/advice greatly appreciated..
    Originally posted by ameliab1909
    Do they have to go to private school? You would save yourself a huge amount of money. If your kids are smart and you can give them the time to encourage them they can do as well or better than private school kids with the correct support.
    • ameliab1909
    • By ameliab1909 11th Jul 17, 9:39 PM
    • 8 Posts
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    ameliab1909
    • #6
    • 11th Jul 17, 9:39 PM
    • #6
    • 11th Jul 17, 9:39 PM
    We didn't decide lightly to go private but its the route we have chosen and will stick with..
    • BeatTheSystem
    • By BeatTheSystem 11th Jul 17, 10:00 PM
    • 142 Posts
    • 78 Thanks
    BeatTheSystem
    • #7
    • 11th Jul 17, 10:00 PM
    • #7
    • 11th Jul 17, 10:00 PM
    We didn't decide lightly to go private but its the route we have chosen and will stick with..
    Originally posted by ameliab1909
    Fair enough. We decided against private, but are now supporting 3 through university which is costing a small fortune. They all got A*, A's and the odd B at A level and are getting Firsts at Uni (Russell group). So it is possible to survive a comp, I suppose it depends where you are in the country and in your town. In a good comp I would say around 10% or so of the kids really excel, I admit they have to as I would agree that comp facilities and not as good as private. I understand why people don't want to risk sending their kids to comp schools as the probability of success is statistically higher with private schools, but on the other hand I have seen some real duffers come out of private school. Best of luck, we all want the best for our kids.
    • ameliab1909
    • By ameliab1909 11th Jul 17, 10:07 PM
    • 8 Posts
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    ameliab1909
    • #8
    • 11th Jul 17, 10:07 PM
    • #8
    • 11th Jul 17, 10:07 PM
    we do indeed want the best and if I just say the words 'normal for Norfolk' it may make more sense to people why we are paying through the nose to get our kids a good education..!
    Cue all the people from Norfolk flaming me...
    • BeatTheSystem
    • By BeatTheSystem 11th Jul 17, 10:14 PM
    • 142 Posts
    • 78 Thanks
    BeatTheSystem
    • #9
    • 11th Jul 17, 10:14 PM
    • #9
    • 11th Jul 17, 10:14 PM
    To answer your original question if you have no other cash available and you wish to guarantee their places for the next few years you might as well pay up, you could try it on and ask for a couple more percent?

    You might look at P2P, there are a few accounts that have provision funds and in all probability you probably wont lose capital (but it is possible to lose capital) these products from the likes of ratesetter, zopa and assetz capital pay around 3% and have instant access. I use these as near cash bank accounts but I have substantial assets elsewhere.

    Alternatively, pay off the mortgage and arrange with the lender some kind of offset saving facility where you can withdraw cash each year to pay the fees. I would be cautious however as if you have anything other than a fixed rate your payments will increase if/WHEN interest rates start to rise.

    Can you not pay the fees out of salary on an ongoing basis and pay down the mortgage?
    • daveyjp
    • By daveyjp 11th Jul 17, 10:18 PM
    • 7,045 Posts
    • 5,434 Thanks
    daveyjp
    If the up front cost is 2-4 times the current fee you also need to take into account the effect of not being subject to any annual price increases.
    • ameliab1909
    • By ameliab1909 11th Jul 17, 10:20 PM
    • 8 Posts
    • 0 Thanks
    ameliab1909
    Beatthesystem - thank you.
    We could return the money yes and would instantly save £200pcm on payments - we have rental income that would cover all the fees every month...just about..plus an income
    That option however leaves little room for if something went wrong. If a house was empty for a month or two or reduncancy/illness. Yet another option might be to pay a big lump back (almost all of it) but retain a small amount in savings.
    • MallyGirl
    • By MallyGirl 11th Jul 17, 10:21 PM
    • 1,902 Posts
    • 6,345 Thanks
    MallyGirl
    Hi there
    Am really keen to get some views on this..
    Got two sprogs in private school. The school are offering 2-3% discount for fees paid in advance (2 years fees = 2% off, 3 years 2.5% off, 4 years 3% off).
    We have got £117,000 which I think would just about be enough to scrape the 4 years and therefore attract 3%
    Originally posted by ameliab1909
    Is the discount 2% off and fees fixed for the discount period? If so, then in these times of 4 or 5% fee increases year on year the discount would be more like 7% in subsequent years. You need to be very clear on what is being offered.
    • ameliab1909
    • By ameliab1909 11th Jul 17, 10:23 PM
    • 8 Posts
    • 0 Thanks
    ameliab1909
    thanks
    If the up front cost is 2-4 times the current fee you also need to take into account the effect of not being subject to any annual price increases.
    Originally posted by daveyjp
    They built in a 5% annual increase accumulator on the quote they gave us and said if its over 5% we have to pay the difference - if its less than 5% we get a bit back.
    • ameliab1909
    • By ameliab1909 11th Jul 17, 10:25 PM
    • 8 Posts
    • 0 Thanks
    ameliab1909
    fees
    Is the discount 2% off and fees fixed for the discount period? If so, then in these times of 4 or 5% fee increases year on year the discount would be more like 7% in subsequent years. You need to be very clear on what is being offered.
    Originally posted by MallyGirl
    Hi there - no the fees aren't fixed. We have been given a quote for period of time that includes a 5% accumulator each year.
    • MallyGirl
    • By MallyGirl 11th Jul 17, 10:29 PM
    • 1,902 Posts
    • 6,345 Thanks
    MallyGirl
    In that case my feeling is the discount isn't enough to give them all your cash
    • ameliab1909
    • By ameliab1909 11th Jul 17, 10:32 PM
    • 8 Posts
    • 0 Thanks
    ameliab1909
    the more people comment and the more I reply the more I think what a terrible deal it is!
    I think maybe paying back the mortgage and using rental income to pay the fees monthly is probably the way ahead..
    • george4064
    • By george4064 11th Jul 17, 11:01 PM
    • 819 Posts
    • 866 Thanks
    george4064
    I know parents at my school cut a deal like this, the main benefit for them was that they paid a fixed annual school fee for the 4/5 years, whilst every other parent would pay the fees year on hear with the rises.
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

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    • Cash-Cows
    • By Cash-Cows 12th Jul 17, 6:23 AM
    • 155 Posts
    • 111 Thanks
    Cash-Cows
    Is you your money protected? What would happen if the school went bust?
    • TheGardener
    • By TheGardener 12th Jul 17, 7:31 AM
    • 2,121 Posts
    • 2,013 Thanks
    TheGardener
    2 prep schools in this area have gone bust in that last 5 years. One of the private high schools was a bit wobbly for a year but scraped though with 'donations' and financial advice from a few very wealthy parents.
    If you go with the advance fees - it needs to be in a cast iron protected scheme (tricky to think what that scheme would be - the Insolvency Service have far reaching powers...)but I'd find other ways to get a return on the capital if I were you.
    • bowlhead99
    • By bowlhead99 12th Jul 17, 8:01 AM
    • 6,692 Posts
    • 11,889 Thanks
    bowlhead99
    I agree on the point about needing cast iron protection on the cash paid in advance, just like you would have in a bank account, otherwise it becomes speculative / risky.

    Also you mention the alternatives include fixed bonds at 1-2% (taxable) or paying off a mortgage which is presumably also somewhere around 2% (presumably no tax effect unless its a mortgage on a BTL property in which case paying your mortgage reduces interest cost and increases profits and thereby 20% income tax on the interest 'saved')

    It's important to realise that those rates earned on savings deposits or saved on lower mortgage interest are annual amounts, whereas the discount for upfront school fees are a one off saving covering a few years.

    For example if you take the 4 year deal you are saving fee in year one and year two and year three and year four. So, some money off your bill in the first year but also some money which wouldn't have been paid until the second or third year or fourth year. For simplicity of really rough numbers you can probably average it and say it would all have been due at the end of the second year. So, by taking the deal you are saving money - on average - in two years time.

    Therefore it is like getting 3% given to you in two years time. Don't think to yourself "oh well 3% is better than the 2% I could get on a deposit account or the 2% I could save by paying off mortgage". Because saving rates and mortgage rates are per year. Whereas the offer is only to get 3% of cost saving in about two years time on average, which is only about 1.5% a year and therefore actually sounds lower than the 2% you might find on mortgage payoffs or on savings (though tax would reduce the savings income to some lower net amount depending on personal circumstances) .

    So, (assuming absolute security of the cash you give them), taking the discount and paying up front it might be a bit better than messing around with alternative uses for the money or it might not be, but it does not seem massively compelling as a clear winner. If the discounts were several percent higher, or if they protected you from price rises, then they would be more compelling - but I wouldn't be falling over myself to sign up at those rates you've been offered.

    Given you're not really saving loads in the context of bank saving accounts or mortgage payoffs, it's not really 'peace of mind' to settle up now, because if they want to put the price up they can still come after you for more money, and you need to hope the guarantee / trustee document is worth the paper it's printed on. If the potential saving is not massive, you would probably sleep more soundly in your bed with a massive pile of cash in bank accounts guaranteed by the financial services industry as a whole and ready to cope with whatever challenges life throws your way.
    Last edited by bowlhead99; 12-07-2017 at 8:09 AM.
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