Up to $500,000 in school fees per child

Figures released by the Australian Scholarships Group suggest that the cost of educating your child could be up to $500,000 if you send them to the top private schools. Given that annual fees start around $10,000 per year from early primary school that total figure probably comes as no surprise.

ASG have kindly provided very detailed summaries, which makes their information worth a look.

Figures released by the Australian Scholarships Group suggest that the cost of educating your child could be up to $500,000 if you send them to the top private schools.

Given that annual fees start around $10,000 per year from early primary school that total figure probably comes as no surprise.

If however you are hoping to send your children to private schools let this be another nudge to ensure that you have detailed plans in place for how you are going to be able to afford that dream.

At the same time consider what safety nets you have in place. Do you really want to have to move your children to a new school away from their friends if you strike a tough financial patch?

Note that whilst I appreciate ASG publishing these figures I am not a fan of education bond products like those of ASG. I believe there are better ways to save up for and fund your children’s education. I believe funding school fees should be looked as one lifestyle goal (albeit a big one) as part of a total financial well-being plan. That can give you greater flexibility as well as better bang for your savings buck.

School fee summaries and estimates by state

ASG have kindly provided very detailed summaries, which makes their information worth a look.

You can browse national figures and by state. Figures are also split between metropolitan and regional and between education ‘systems’ (Government, Systemic such as Catholic, Private).

And they also include estimates for children starting pre-primary this year (2011) and those children born this year.

View the ASG school fee estimates here.

 

 

The annual cost of retirement

If you struggle to define your retirement planning target one initial starting point can be to consider how much current retirees spend each year. Here the Westpac ASFA Retirement Standard is helpful, and it has just been updated.

An essential ingredient in successfully creating wealth is your purpose – particularly one that motivates you.

One of the common purposes of wealth creation is to accumulate enough money that you can make work optional (aka “retirement”.) This is your point of financial independence, whether you choose to cease working or not.

In my financial planning experience most people can’t tell me how much money they’d like to be able to spend in retirement. Without a clearly defined target the task of working out how much you need to save each year is quite difficult. And online retirement calculators can’t help you as they require a target input too.

If you struggle to define your retirement planning target one initial starting point can be to consider how much current retirees spend each year. Here the Westpac ASFA Retirement Standard is helpful, and it has just been updated.

Retirement cost of living

As at the end of the June 2010 quarter a couple needed approximately $53,500 per year to live comfortably in retirement (per household). Couples living more modestly survived on approximately $30,400 per year.

A single retiree required approximately $39,000 per year to live comfortably.

The Westpac ASFA Retirement Standard assumes the retirees own their own home. It defines a modest retirement lifestyle as “better than the Age Pension, but still only able to afford fairly basic activities.”

A comfortable retirement lifestyle is defined as: “enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.”

You can obtain detailed budget break downs on the ASFA website. The Westpac ASFA Retirement Standard is updated quarterly.

If you are using this information in a retirement calculator remember to increase the amount each year in line with inflation. Some calculators do this automatically.

Not So Average Wedding Cost

Wedding On The BeachIn the life planning step of my “Save For The Significant” process one of the common goals is a dream wedding.

Parents often list a goal of wanting to contribute to their children’s weddings. And independently minded young couples often want their dream wedding without the “suggestions” from their well-meaning parents – thus they want to pay for their own wedding.

Weddings are costly and not an expense most people can easily absorb into their income for that year. That means they need to be save up for and most people get that. But how much does a wedding cost and how early do you need to start saving?

Earlier this year Bride to Be magazine released the results of their Cost of Love 2008 survey, which found the average cost of a wedding was $49,202.

That is only a couple of thousand dollars less than the average Australian wage before tax.

Since many couples probably earn less than the average wage they need to be saving one partner’s full wage for probably two years or more just to pay for their own wedding. That could be a tough ask especially if you are also saving a deposit to buy your marital home.

When you’re already dreaming start saving

Perhaps a better approach would be for ladies who dream of a lavish wedding to start saving right now, even if you are not yet in a committed relationship. When cupid strikes the wedding can creep up quicker than you can save.

Blokes Beware – Bling is Costly

Blokes should also be aware that the average cost of a bride’s engagement ring was $5,116. It seems the old notion of three months wage may be continuing. So if you are a traditionalist then get saving right now mate, ‘cos you don’t want to pay costly credit card interest on a depreciating asset like a ring.

Then of course you need to consider the wedding bands. They cost an average of $1,507 for the bride and $1,096 for the groom.

Remember that costs increase

One tip when you are establishing your savings plan is to factor in an increase in costs. One article about the survey results reported that the average wedding cost had risen 76 per cent in eight years. That equates to cost increases averaging 7.3% each year.

Save for your dream wedding

Your wedding and honeymoon are not the most important events in your life but they are one during which you get to be the centre of attention and one that will be remembered. So if you want to be able to do it as you dreamed it the ensure you have saved for it. Don’t make it any more expensive than it needs to be by borrowing money and paying interest.

Save for the significant events in life and you can have enough money for what you really want.

(I can’t find the official survey results on the magazine’s website but they were widely reported in newspapers including here and here.)

Calculating the costs of your children’s education

Being a parent is one of the greatest gifts I have received in my life. But over the past two years I have also noticed the increase in our spending, and we have not yet even hit school or the teenage years. I know from working on education plans for my advice clients how much can be spent on giving our children the best start in life that we can.

Australian Scholarships Group (ASG) have just released an online calculator designed to help parents estimate the future costs of their children’s secondary school education. They claim it is based on extensive research of costs in addition to school fees. You can also select to calculate for different categories of school and differentiate based on your state of residence.

You may also be interested to read this more detailed research report from AMP & NATSEM, which examines the total cost of raising children. AMP & NATSEM Report – The Cost of Raising Children (Oct 2002) Note that the figures are based on values in 2002 and should be indexed for inflation.

(Please note that Australian Scholarships Group also offer education savings plan products – this post is NOT a recommendation for their product nor a recommendation for ‘education bond’ class of products . There are many different ways to save for your children’s education and you should explore them with your adviser.)

The cost of retirement

For most people the major goal of wealth creation is to reach the point of financial independence. That point is when you have enough net wealth that you can choose to never work again and you will be able to meet your lifestyle expenses. (Commonly this is referred to as retirement but the future seems to be that people will choose to continue working past the point of financial independence.)

One of the most common questions I am asked is “how much net wealth do I need to retire?” The answer to that question is very dependant on the lifestyle you plan to lead in retirement. If you are unsure how to define that lifestyle then one place to start is by looking at what current retirees spend in retirement.

Today, Westpac and ASFA (The Association of Superannuation Funds of Australia Ltd) released their latest Retirement Standard research. (Link to the research). The average retired Australian couple spends just under $50,000 per year in retirement to live a comfortable lifestyle. This assumes that they own their own home, and includes some travel but is certainly not a lavish lifestyle.

It is worth paying attention to such research of actual expenditure. Most clients I see guess they will spend lower than that amount. Yet when they actually describe their planned retirement lifestyle and then cost that lifestyle it is significantly higher than the “comfortable lifestyle” definition used in the research.

So whilst current retirees are living off that amount my guess is they do that partly by necessity and partly because they grew up in a different generation with different ambitions. Later generations appear to have much higher expectations. If that includes you then you will need to start planning early or be prepared to lower your lifestyle expectations.