Planning for education costs

February 2nd, 2012

More than most professions, every doctor has undergone extensive education to achieve their vocational qualification. The importance of quality education is clear and this usually translates to a desire to educate the next generation in high quality schools and tertiary establishments.

It seems that every year around this time there is a scattering of articles in the nation’s newspapers regarding the growth of private school fees, currently running at over 6%. This rate of increase not only comfortably outpaces inflation but continues to do so with the schools receiving significant government subsidy that is supposed to provide some relief for the fee payer.

In reality, as fees increase into the future there will continue to be demand for the places, what will occur is the steady capital improvement of the facilities and the quality of the teaching staff, fuelling more demand. Further, the benefits of these institutions often extends far beyond the quality of education and extends into professional networks and other less tangible benefits.

The need to plan for school fees becomes a very important strategy for the current generation of medical specialists. Having children later in life means the children are only completing university and starting to earn their own income when the parents are mid – late 50’s. And we know that beginning to earn an income does not necessarily translate to the children moving out of home, the financial burden often continues.

This mid-late 50’s period would otherwise be the time to focus on building wealth for retirement, the high income medical professional who simply chooses to fund the education with surplus cashflow, could be doing so at the cost of retirement saving.

Many medical professionals fall into the trap of assuming their high income will naturally convert to long term wealth and the achievement of all lifestyle goals along the way, including the education of the children. However what often occurs is that the lack of cashflow control and direction means that you achieve immediate short term goals at the expense of long term retirement objectives.

Clients only ever realise they have made this trade off at the point of retirement, when the need to consider downsizing their home to fund their desired lifestyle becomes a reality. Downsizing the family home to fund retirement is rarely part of a long term plan.

By planning ahead and structuring your affairs correctly you will be able to achieve both goals of educating the children and saving for retirement in the most tax effective manner. A robust system of cashflow management is at the heart of this approach, and is a key service offered to MEDIQ clients.
Once in control of your cashflow you will be able to see how the application of funds will deliver your objectives over the short, medium and longer term, most clients become empowered by this and often are able to improve their surplus cashflow position over time.

If you feel you need assistance with regard to your cashflow management please do not hesitate to contact our Medical Wealth Strategists for an appointment.