At this stage, you have bought your school going children their new books for the coming year (or perhaps second–hand as it saves money) plus their new uniform – my, haven’t they grown – and you are wondering whatever about the costs so far.
You can listen to our podcast with John Lowe in full above, where he shares his Back to School, Budget tips with Taragh Loughrey-Grant on The LifeStyle Show.
How are you going to fund the ongoing ancillary costs for the remainder of this year? Remember if your overall expenditure exceeds income, you have two choices, earn more or cut costs. While it may not be possible to earn more, you still have to figure out where the money is going to come from.
Here are four simple tips to help:
It is really important that you now plan your finances and often. My recommendation is that you should sit down and for a couple of hours every month address your financial issues.
Like a road map, you will need to know where you are going and anticipate problems along the way.
So in the case of your children’s costs, write down all their current expenditure (transport costs, lunches, additional books, school trips, sports equipment, extracurricular hobbies, pocket money)
Take a hard look at every cost – do you really need it or is there a cheaper alternative? Car pooling for instance. With lunch allowances, some parents give their child up to €10 a day whereby you could easily prepare a packed lunch for under €3 a day or about €1,200 saving every year!
If you send your child to fee-paying schools, as a general rule of thumb you will need to find €70,000 from the time the child is born to the time they leave 3rd level education to cover everything including education.
You need to plan this – you could start by saving the Child Benefit (currently €140 per month per child) into a Regular Saver account - you can save between €100 and €1,000 for 12 regular months attracting a current best rate of 3% (EBS) - and once a lump sum has accrued, invest elsewhere for a greater return on your money.
For more sophisticated investments, you will need proper professional and independent advice.
Even investing €250 a month from the time your child is 5 until they are aged 18 will yield c. €42,000 at 3% growth a year - this is the figure a recent bank study found to be the funding amount required for 3rd level education alone!
Some parents not only use their Child Benefit but have to borrow as well for their children’s annual school requirements. Shop around – generally, credit unions have the cheapest options – c. 6.5%. Check with your local one as they are all independent but do offer low-interest rates especially for education loans.
You have to be a member for at least month and normally would have to lodge 25% of the amount you are looking for into a Credit Union share account to qualify for a loan.
High street banks are next on the list and as they know you will be that much easier to approve. Only borrow for the year – school costs come around every year. Authorised moneylenders should really be avoided – they can charge up to 200%+
Life and disability insurance should be considered and even income protection, in case either or both parents are unable to work financially. Generally, a life policy outside of mortgage protection for a specific term to coincide with the end of your child’s education should again be considered.
This pays out a lump sum in the event of death and for a couple in their 30's would be relatively cheap. The formula for this cover is 10 times your net annual income less any Death In-Service benefits (check with your employer) until completion of your youngest child’s 3rd level education.
Now, do all that and you‘re sorted.
For more information click on John Lowe's profile above or on his website.