How the cost of living crisis could impact your ability to pay private school fees

The cost of living crisis is affecting all of us. In October 2022, inflation reached 11.1%, its highest level in over 40 years. If you’re paying private school fees, the rise in your other household expenses could mean you’re finding them harder to afford.

As you review your spending, let’s look at the key areas making a dent in your budget.

Mortgage rates mount

If you’re on a variable-rate mortgage, the cost of living crisis that’s sent interest rates soaring will already have had an impact on your mortgage repayments. Couple that with the impact of Liz Truss’s mini-budget in September 2022, and average mortgage payments for tracker and standard variable rate mortgages could increase substantially.

Those households on fixed mortgage deals won’t see increases in their rates until their current deal expires. If this is you, there’s a bit of breathing space – for now. But if your mortgage deal is due to be renewed soon, interest rates could still be high. When you start shopping around for a remortgage, you’ll find that the cost of borrowing has risen dramatically.

If you’re looking to remortgage, it’s more important than ever to take independent financial advice. Getting expert eyes on the issue can help keep your mortgage affordable and maximise the money left in your pocket to spend on your family.

Job security concerns

With many industries affected by rising costs and budget squeezes, some businesses are searching for ways to economise. And that could mean shedding staff.

How secure is your job? If you work in an industry that’s been affected by the downturn, make sure you have a plan in place in case you’re made redundant. Do you have savings to tide you over until you can find a new position? How far in advance have you paid your children’s school fees? Protect your finances and your lifestyle by preparing for the worst so that your children’s education isn’t disrupted if your job disappears.

For parents who are self-employed or company owners, think about how your business will be affected if consumer confidence dips or budgets are squeezed. Is your business making savvy recession-beating choices to help you weather the storm?

It’s worth reviewing whether you’re being as tax efficient as possible with your incomes and business expenses – remember, you can pay private school fees through your limited company. This helps keeps school fees affordable, and reduces your tax burden.

Utilities going up

Unless you’re living in a Passivhaus covered in solar panels, you’ll have noticed a hike in your energy prices. The increases are steep, and there’s very little point in shopping around right now as gas and electricity companies are pegging their prices to the energy price cap set by the government.

If your utility company becomes another of the many to go bust, you’ll automatically be shunted to a new supplier, so once the switch is complete, it’s worth talking to them about the best deal available. In the meantime, take sensible measures like turning down your heating, using a washing line instead of the tumble dryer, and switching off lights in empty rooms.

Of course, these steps are a drop in the ocean compared with the cost of school fees, so if your budget is really tight, it’s time to take advice urgently to avoid or mitigate any financial difficulties in paying for independent education.

The cost of motoring

Do you have a car payment, or is your vehicle owned outright?

If you pay for your car on finance, you’ll know the costs are fixed until the end of your contract. But, just like everything else, the cost of car loans rose in 2022. If you’re looking to renew your lease soon, you could be looking at an increase of more than 8% compared with a year ago – with some sources showing an increase of more than 20%. And if you’ll be considering a finance deal on a new car, payments on some vehicles are 40% higher than they were in 2019.

Since it’s difficult to manage without a car, or to downsize your vehicle when you have a family, choosing the right deal is important as costs rise across the board.

And if you own your car outright, be aware that maintenance is becoming more expensive. The cost of parts has risen because of the increase in global steel prices, and labour prices are going up too. It all means garages are having to charge more – according to some reports, car owners are seeing 90% increases on their bills.

The weekly shop

How much has your weekly shop increased? From July to October 2022, inflation on groceries reached almost 14%. For an average household, this will add a significant amount to their usual weekly food bill.

For many households looking to adjust their budget so they can continue to pay their child’s private school fees, there are savings to be made by switching from branded to own-brand products, choosing wonky veg, or heading to discounters like Aldi or Lidl to pick up a bargain.

As with the cost of energy, making small changes may be helpful, but you’ll get a better effect by looking at your finances as a whole.

Taking specialist advice from a financial planner is an investment that will pay dividends. A detailed understanding of your position, including outgoings, will allow you to make the best choices for your money and keep independent school fees affordable.

Getting away from it all

Unfortunately, even a holiday won’t give you a break from the rise in prices – the situation is global, and the costs of flights and accommodation are set to go up.

Despite the increase in the cost of living, holidays will remain a priority for most families. However, if you’re planning to jet off somewhere warm, be aware that airfares could soar – some sources suggest an increase of 12%, others predict prices of up to 25% higher than 2022.

Hotels will be more expensive too, facing pressures of staff retention, higher overheads and high demand.

Life’s for living, so when you plan your getaway, choose an option that fits your budget. And if you need help looking at all your finances, a financial planner will help you see the whole picture so you can focus on what matters without sacrificing your goals and dreams.

What savings do you have if you struggle?

Is your nest egg being eaten away by the rising cost of living? Is your monthly budget being squeezed? Unfortunately, school fees are going up, too.

If you’re worried about the rise in the cost of living affecting your ability to pay your child’s school fees, or you’re facing decisions to give up dreams of early retirement so your child can continue their education, then it’s time to talk to us.

At Eden School Fees Planning, we’re experienced in helping parents gain an in-depth view of their finances against the cost of school fees.

With the dramatic rise in the cost of living, we can even show help you afford school fees without having to sacrifice your own goals for the future. Get in touch to find out how we can help.

Make Hay While the Sun Shines

The time to prepare for a downturn is when the economic situation is good. We advocate not over-stretching to fund school fees or lifestyle.

We promote the idea of living on 75% of what you earn, with the remainder being set to one side. Whilst you can assign a particular goal for this money, such as retirement, it doesn’t really need to be for something specific.

The benefit of living well within your means, and saving/investing a decent percentage of your income comes at times like these when finances may well be stretched.

Shutting the gate after the horse has bolted helps nobody, so if hopefully if you find yourself without an adequate buffer to cope with what the next 12 months or so may throw at you, then some of the small savings in this article may, when combined, just give you the ledge that you need to keep going with school fees.