With education costs continuing to outstrip inflation, parents can expect to pay more for their children’s future education, whether or not recommendations in the Gonski Report* into education are adopted, warns Mr Matt Walsh, head of Lifeplan Funds Management.
“Over the past 15 years, education costs have risen by 119 per cent compared to just 48 per cent for headline inflation figures,” he said.
“The result is a continued erosion of education affordability. Year after year, the cost to families of educating their children has outpaced not only overall inflation but wages growth as well.”
Mr Walsh said the latest Consumer Price Index (CPI) figures mask the fact that education costs in the last year alone have risen by 6 per cent (tertiary education 4.7 per cent; secondary education 7.7 per cent; and preschool and primary education 5.5 per cent).
“We hear a lot about the rise in prices for electricity and water, or household groceries, for example, but the long-term impact of education affordability – which has risen at a far greater rate than these other costs – often slips under the radar.
“While the Federal government appears to recognise that Australian families need assistance in meeting the costs associated with their children’s education, parents cannot assume that any government assistance will make up the shortfall between what they can afford and what education really costs.
“The Schoolkids Bonus announced in the Federal Budget is a help, but is unlikely to go very far in offsetting the steadily increasing cost of education for most families.
“Consequently, parents must plan to have funds available to contribute to their children’s education for some years to come.
“The last thing any parent would want to do is pull their children out of a school because they can no longer afford to pay the fees, but increasingly it is a situation that many parents who have children in the private system are facing.
“Anecdotally, we know the number of schools seeking the services of debt collectors is increasing,” he said.
Mr Walsh added that when the Gonski Report recommendations are eventually adopted, private school fees are likely to rise even faster than the present trends.
“Even parents with children in the public school system can’t afford to be complacent about their child’s education. Government assistance will help slightly, but not enough to meet rising costs.
“Many parents are simply unprepared for the financial magnitude of the education they want for their children.
“We need to start looking at the example set by the US, where families now save for college and tuition fees from the moment their child is born.
“Any plans to help children with a deposit for their first home or a car are nice in theory, but the reality is that a good education is far more valuable in the long-term, as research shows that those with a good education are likely to earn more in their career.
“With asset prices low, every Australian family should consider its own education savings plan.
“A small upfront investment can go a long way over the long term,” Mr Walsh said.
Lifeplan Funds Management is a specialist business of Australian Unity Investments, with total funds under management of $1.9 billion (as at 30 April 2012). It is a market leader in investment and funeral bonds, and a leading provider of education investment funds.
For more information please contact:
Mr Matt Walsh – Phone: 08 8236 4706
*Gonski Report – Review of Funding for Schooling (Final Report) December 2011
11 May 2012