Pay as you Go

Many parents have no savings plan, they simply "pay as they go" from their monthly salary, or spread a year's costs over 12 months by saving a quarter of the fees a month, so that every four months they have enough to pay the termly bill. This might be because they haven't started saving early enough, they are confident they will be able to continue to do this throughout their children's education or simply because they can't afford to save any more.

There is obviously nothing wrong with this approach but it can leave you short if there is an unexpected bill that needs paying, whether it be a foreign school trip or a broken down boiler at home. Either way it's good to try and have a small buffer somehow to tide you over.

If you do decide to pay as you go its best to work out a budget and stick to it, build in planning for Christmas and annual holidays, and do try to put a little extra away each month to build that contingency fund.

Finally, many schools offer the facility to pay them monthly instalments leaving just a small extras invoice each term. Such arrangements can ease both your cash flow and your administration.

Pay in advance

If you have the cash, this is an option you should seriously consider, and is one of our Top Tips (see below).

Many schools allow you to pay in advance at either existing rates or even a discount. You therefore avoid the effects of price inflation – play with our modeller to see what a huge impact even small inflationary increases can have over time. Obviously any discount makes this proposition even more attractive.

Timing wise, you are best writing to the school for an advance fee schedule at the beginning of the Summer term – well before they announce the new fee schedule for the following academic year, and then pay within the dates set out in their reply (usually 30 days). This means you'll be paying the next year, or years as little in advance as possible.

The downside of paying in advance is that you lose the benefit of any interest or other returns on savings, so you could be worse off if fees actually rise by less that the return you would otherwise have made on your investments.

If your fees are £10,000 a year and you expect them to rise by 10% a year, then you'll pay £11,000, £12,100 and £13,310 over the next three years, a total of £36,410. If you were able to pay them all in advance, you'd have just pay £30,000. This would save you £6,410, even without any discounts the school might offer. The key question you need to ask, if you are in the position of being able to pay in advance, is whether you feel you could make more than £6,410 after tax in interest or investment growth over the same period of time.