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private schools 2018

A financial plan can lay out how costs can be handled year by year

If you are considering private school as an educational option, you’re probably also thinking about the potential cost and how to finance it. How do families with children approach the issue of funding private school? What do parents need to know to make sure they’re making informed decisions?

These professional financial planners explain: Julia Chung in British Columbia and Sandi Martin in Ontario, fee-only financial planning partners at Spring Financial Planning, and Shay Steacy, a fee-only financial planner at Kind Wealth in Ontario.

Here are their top four tips.

1. Dig into your values

Depending on the school or program and the number of years your child or children would attend, the costs of private school can vary widely – and in most cases will be many thousands per year. Tuition costs can range from $5,000 a year at a smaller day school to $55,000 and up for a top boarding school. When you multiply that amount by the number of years a child might attend, the sum can get quite large.

Although scholarships and other forms of financial assistance such as tuition waivers can help to reduce the cost of private school for children and families who meet the criteria, many families will need to foot the bill directly. (For children with disabilities, including learning disabilities such as dyslexia, tuition paid to a private school that provides services designed to educate children with those disabilities may be eligible for the medical expense tax credit on a parent’s yearly tax return.)

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Julia Chung, a fee-only financial planning partner at Spring Financial Planning in British Columbia.

This means that funding for private school will need to be found from within the existing family budget, usually by reallocating spending after all other non-discretionary needs – such as food and shelter – are met.

The upshot? The place where families should start, Ms. Chung says, is to ask: “Is private school worth it to us?”

“The decision to direct family resources to private school costs is really a philosophical decision about education for your children,” Ms. Chung says. “For almost all families, dollars are finite, and when your family dollars need to meet many different – and sometimes competing – needs, one consequence is that you need to be much more mindful in your spending. So the first question to answer is how making room in your budget for private school aligns with your personal values.”

Only once that process is complete, she adds, can a family begin planning for including the costs in a family budget.

2. Take the long-term view

All planners cautioned that families should be careful to ensure they’re not taking a planning approach that’s too short term.

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Sandi Martin, a fee-only financial planning partner at Spring Financial Planning in Ontario.

“Your commitment might be 13 or 14 years to take a child through to the end of high school. That’s a long time span for planning – in my experience, people find it difficult to think in chunks of more than five years,” Ms. Martin says.

But over the long term, you might consider spending on private school like an investment in the future earning power of your children. “If you run the numbers,” Ms. Chung says, “investing in education beats any other asset class over time,” because it increases earning power over a lifetime.

You also need to think through when your financial commitment might end. If your child wants to go to university, do parents cover that cost as well? Do you provide funds all the way to and through a PhD, if that’s where your child ends up? While the decisions don’t need to be made today, the planners caution that parents should be aware of the possible longer-term implications of today’s decisions.

3. Consider your trade-offs

A decision to spend money on private school today likely will affect the rest of your financial picture. Does it mean forgoing or scaling down family vacations? Retiring later than you originally planned? Driving a different car, or replacing a car less frequently? It might also change how you support your kids financially over time – cutting back on contributions to weddings or choosing not to help with the down payment on a first home, for example.

Creating a financial plan with the help of a planner can help to show, year by year, how the cost of private-school tuition can be accommodated within a family budget, and the consequences for the rest of your financial lives. This means families can identify specific decisions they will face as a result of allocating dollars to private-school costs.

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Shay Steacy, a fee-only financial planner at Kind Wealth in Ontario.

“As planners,” Ms. Steacy says, “we always work with clients who want to do more with their money, but parents who are not financial planners are typically not thinking about these decisions in this way.

"People don’t usually understand the impact of their decisions unless they can see it – which is what a financial plan can provide.”

4. Put your plan in place

Once you’ve confirmed your commitment to private school, adopted a longer-term time horizon for your decision, and contemplated the trade-offs you might be willing – or might be required – to make in order to finance a private-school education, it’s time to put your plan in place.

“If you are already looking at private school, you probably know the schools you’re thinking of, so research how much you’d pay per year for your child to attend – and don’t forget the cost of uniforms, transportation, activity fees and the generally acceptable level of donations your family might be expected to contribute toward special fundraising events. Like everything else, these fees tend to go up over time, so learn to expect increases each year,” Ms. Martin says.

In the end, all the financial planners we consulted agree: Choosing to send a child to private school can be a big decision for any family, but putting a plan in place can help. Taking the time to explore your values and options, and adopting a long-term planning horizon, can help to provide confidence in your choice.

Help! I can afford to send only one child to private school. What should I do?

What if you have more than one child, but feel that you can afford to send only one to private school? Jonathan Milevsky, a scholar of natural law who holds a PhD from McMaster University, explains the philosophical underpinnings of such a dilemma.

“Looking back at the ancient Greek emphasis on virtues,” Dr. Milevsky says, “we can see the call from Plutarch to educate children and, from Aristotle, the responsibility to ‘treat equals equally.’ We could interpret that to mean we should strive to provide the same opportunities to all of our children. In this case, however, that view may not be relevant, since a private-school opportunity is not necessarily open to every child in a family even if finances are not a consideration, as access can depend on academic achievements.

“If we rely on a more modern view, that of human rights – including children’s rights – we could ask whether all children in a family have the same right to an education; in this case, to a private-school education. But it’s hard to imagine that not sending children to a private school is depriving them of a human right. First, you would certainly be meeting the basic educational requirements, at least judging by the standards of the United Nations. And secondly, because different children have different needs and aptitudes, the choice of school may be a response to children’s skills, not a violation of their rights.”

Finally, Dr. Milevsky says, what parents likely need to consider most strongly is the consequences for the family of their private-school decisions.

“While preferential treatment among siblings can be damaging to families, this problem is not impossible to overcome if the other children in the family see the decision as fair,” he says. “Studies show that once they are given a compelling reason, siblings are more likely to accept their parents’ choice.”

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