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Planning for your children, education can be an expensive business

HSBC Expat

Educating children abroad can be an expensive business, so it’s important to start planning early.

Good quality education is a priority for every parent but for anyone considering relocating their family overseas it can be a deal-breaker. “One thing I have learned is to make sure your family is happy – that is the number one factor in whether your move overseas succeeds or fails,” says Jonty Summers, director of Bladonmore Middle East, who moved with his wife and two children to Abu Dhabi in June 2009 to manage the corporate communications firm’s regional office.

Companies will often pay for private schooling as part of an overseas relocation package but it is still important that you set aside sufficient money to cover school and university costs because you never know where your next move will take you.

Savings and investment options

Your expat status gives you an opportunity to take advantage of tax-efficient savings and investment opportunities, and that could help you build up an education pot that can cover long-term school and university fees, despite rising inflation. Among the potential offshore options, which include simple savings accounts and more complicated investment arrangements, one route is to put a lump sum into an offshore bond if you plan to move overseas for more than five years, according to Elizabeth Foran, an independent financial adviser and director of Five Star Financial Consultants.

There are lots of funds available and you will only pay tax on the investment if and when you come back to the UK. The bond can also be transferred into your child’s name when they reach the age of 18 but there are likely to be exit penalties if you take out some or all of the money in the first five years. The minimum investment thresholds for these bonds are rising and you will currently need a minimum of about £50,000.

While it may be true that offshore funds are of particular benefit to those with a large sum to invest, there are nevertheless plenty of options, including monthly payments and other structured products, which may suit all expats. And with many expats moving from one overseas assignment to the next, the versatility of an offshore account could be a key benefit.

What you need to consider

So what are the costs involved? Nat Price, owner of specialist education consultancy Dean Associates, says that if the cost of a day-school place at a private secondary school in the UK is about £15,000 then the comparable figure for a place at an international school is about £20,000, but the costs do vary from country to country. For example, the cost of a typical day-school place a private school in Abu Dhabi can range from £8,000 to £15,000.

“Although you have to go private in the UAE, the country has built lots of new schools with amazing modern facilities over the past two to three years as part of its long-term plan to invest in education,” says Summers, whose children haven’t had any problems settling in. “The main difference for them has been wearing sunshades in the playground,” he says.

For families that are posted to really undeveloped countries – a particular problem for people working in the oil industry – the choice of international schools may be limited and it is wise to check that they are properly accredited by an appropriate education body that provides quality assurance. Boarding schools, whether they are based abroad or in the UK, are another option. They are often of a higher standard; however, they can be expensive.

In developed countries, expat children are often allowed to study in state-funded schools – this is the case in the US, Australia and Europe – but there will often be a charge for access to the education system. Alternatively, there is a wide range of good English-speaking private schools but these can be expensive.

Start planning today for a brighter future tomorrow

Planning ahead is important no matter what the age of your children. Families with younger children may face greater competition for school places at good schools than those with teenagers. “A lot of families tend to go overseas when their children are young so it is more challenging to find places if your kids are up to five years old,” says Summers.

However, moving overseas or back home can be more disruptive for older children due to exam schedules and variations between different curriculums. “Very few UK schools offer the International Baccalaureate below diploma level (age 16 to 18). So if you’re coming back to the UK before your children are 16 there will need to be some communication between the two schools and as much notice as possible,” says Price.

Planning ahead to cover the rising cost of university fees is another important issue. If you’re living overseas when one of your children applies to study at a UK university you can expect some “rigorous questioning” as to whether you qualify as a home fees student, according to Price, although your children should qualify as British nationals.

“You will have to deal with a lot of paperwork,” says Price, who goes on to recommend that employees who move with their company make sure that they have appropriate proof that they are only overseas on a temporary basis for a work assignment.

Ultimately the most effective planning is a two-stage process: moving overseas is only the first step – planning for what happens when you move on, or back home, is just as important.

HSBCThis is one of a series of articles from HSBC Expat we’re publishing to help current and future expatraites to manage their finances. This series will contain articles regarding tax, cost of living, family finances and growing your wealth.

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