A married couple with two children were looking to fund the senior education of their son over the next seven years.
A proportion of the fees were to be provided by a grandparent, leaving a balance of £90,000 to be paid.
The London couple were paying for childcare at the time which was being phased out; redirecting this provision would reduce the sum required to £32,000.
Although the couple had a manageable mortgage and a combined monthly net income of £4,700, they had not been managing their finances efficiently and therefore didn’t consider they had enough disposable income to fund the balance.
The capital for their mortgage of £120,000 was to be paid by endowments which were performing badly.
The couple also had credit card and car loans in excess of £22,000.
The clients needs were established as :
- Restructure finances to allow school fees to be affordable
- Create an emergency access fund for fees
- Arrange a suitable and comprehensive school fees insurance protection plan
The advice given was to surrender the endowment policies to repay loans and fund the first two years of school fees. A repayment mortgage would replace the endowment mortgage and alternative (cheaper) arrangements made to protect the mortgage and (additionally) the school fees.
Removing the credit card debt and taking out a secured loan for school fees made a significant saving.
Whenever there are insufficient funds and a school fees loan is required, choosing a secured loan will offer the cheapest interest and allow the cost to be spread over a longer period.
The monthly outgoings would be significantly reduced, enabling the savings to be invested to pay for the five remaining school years.
By restructuring the client’s financing, school fees could be funded and guaranteed via a protection scheme and the shortfall in their mortgage addressed without having to allocate any new funds!
The savings predicted would leave the couple £60 per month better off.
Private education does not come cheaply in London, but SFIA have many proven strategies to make them more affordable.