How to Plan for Education Costs Without Financial Stress

Most parents want to give their kids the best start they can, and for many families, education is a big part of that.

It might be the school you hope they will attend, the sport they fall in love with, the music lessons they want to try, the tutoring they may need, or the idea that one day you might be able to help them with university or even a first home deposit.

None of that is unreasonable. In fact, it is exactly the kind of thing many parents and grandparents want to do if they are in a position to help.

The challenge is that education costs have a way of creeping up on families. You might start by thinking about school fees, but then come the uniforms, laptops, textbooks, excursions, camps, sport, music, tutoring and all the other costs that seem to arrive at the least convenient time.

That is why I think education funding needs to be treated as a proper financial planning conversation, not just a school conversation.

Because the real question is not only which school do we want our child to go to?

It is how do we give them options without putting our mortgage, retirement plans, cash flow or lifestyle under pressure?

In this episode of Wealth Builder, I spoke with Marie Lazar from Futurity Investment Group about the real cost of education in Australia, the different ways families can fund it, and where education bonds may fit as part of a broader plan.

How much does education really cost in Australia?

The cost of education in Australia can be much higher than families expect, especially once you include the extras outside basic school fees.

In the episode, Marie shared Futurity’s research on the estimated cost of sending a child who starts prep in 2026 through 13 years of schooling. Based on national averages, the estimated total cost is $113,594 for government school, $247,174 for Catholic school, and $369,594 for independent school.

Those figures include costs such as uniforms, laptops and textbooks, which is important because it shows that even government schooling is not cost-free.

That is often the bit that catches people by surprise. A family might assume the main decision is whether they can afford private school fees, but even if your child goes through the public system, there can still be a steady stream of costs across the year.

And if you are considering Catholic or independent schooling, there is another layer to think about, because school fee increases can move faster than general inflation. So while a fee might feel manageable today, the question is whether it will still feel manageable in five, eight or ten years.

That is where early planning can give you more breathing room.

Why do education costs put so much pressure on family cash flow?

Education costs can put pressure on family cash flow because they are not always predictable, and they often land on top of everything else a household is already trying to manage.

Most families are not sitting around with unlimited spare cash waiting for the next invoice to arrive. They are paying the mortgage or rent, covering groceries, insurance, utilities, car costs, holidays, medical expenses and all the other parts of everyday life.

So when a school camp, new laptop or unexpected tutoring bill lands, it can quickly become one more thing to absorb.

The other thing is that education spending is emotional. If your child needs support, you want to give it to them. If they are passionate about a sport or activity, you want them to have that chance. If a particular school feels like the right environment, you want to make it work.

That is completely understandable, but it is also why education decisions can become financially stressful if there is no plan behind them.

A good plan does not mean you need to know every cost in advance, because no one can predict exactly what their child will need or want over the next decade. What it does mean is that you are not relying on future-you to magically find the money every time a bill comes in.

What is the best way to save for your child’s education?

There is no one best way to save for your child’s education, because the right approach depends on your family’s cash flow, mortgage, tax position, time frame, risk comfort and whether anyone else, such as grandparents, wants to contribute.

Some families use a high-interest savings account because it is simple and easy to access. Others use their offset account, particularly if they have a mortgage and want their savings to reduce the interest they pay. Some families invest through a share portfolio, while others look at education bonds because they want a dedicated structure with potential tax benefits when the money is used for education.

Each option can make sense in the right situation, but each one also has trade-offs.

A savings account is easy to understand, but the return may not keep up with rising education costs. An offset account can be useful, but if all your money is sitting in the same place, it can be hard to mentally separate education savings from everything else. A share portfolio can provide growth potential over the long term, but markets move around and you need to be comfortable with that risk.

An education bond may be useful for some families because it creates a dedicated structure for education funding, but it still needs to be assessed properly. It is not automatically the right answer for everyone.

That is why the starting point should not be what product should I use?

The better starting point is what are we trying to fund, when will we need the money, and how does this fit with the rest of our financial life?

How does an education bond work?

An education bond is an investment structure that can be used to help fund education expenses, and it may provide tax benefits when the investment earnings are used for eligible education costs.

Marie explained in the episode that an education bond has two main parts. There is the capital component, which is the money you contribute, and the earnings component, which is the investment growth.

The bond provider pays tax internally on the earnings, up to a maximum rate of 30%. If the earnings are later withdrawn for eligible education expenses, Futurity may provide a 30% education tax benefit within the bond.

That can be attractive for some parents or grandparents, particularly if they are on a higher marginal tax rate and want to build a dedicated pool of money for a child’s education.

Education bonds can also offer a choice of investment options, which means they are not the same as keeping money in cash. That can create the opportunity for growth over time, but it also means there is investment risk, so the time frame matters.

For many families, an education bond is best thought of as a longer-term strategy rather than a place to park money you might need next year.

Is your money locked away in an education bond?

Your own contributions are generally accessible, but the tax treatment depends on whether you are withdrawing your original capital or the investment earnings.

In the episode, Marie explained that the capital component can usually be accessed from day one, tax-free, for any purpose. So the money you have contributed is not necessarily locked away until your child finishes school.

The earnings component works differently. If earnings are used for eligible education expenses, education bond tax benefits may apply. If you want to use the earnings for something other than education, the 10-year rule becomes important, because after 10 years the earnings can generally be accessed tax-free for any purpose.

That flexibility can be useful, but it still needs to be understood. An education bond may give you access to your capital, but that does not mean it should be treated like an everyday savings account.

Before setting one up, it is worth being clear on what you are trying to achieve and whether the time frame lines up.

Can grandparents help pay for education costs?

Grandparents can absolutely help with education costs, and for many families that support can make a meaningful difference, but the way the help is structured can matter.

A grandparent might simply gift money to their child or grandchild, and in some families that may be perfectly appropriate. The possible downside is that once the money is gifted, they may lose control over how and when it is used.

For grandparents who want more structure, an education bond may be worth considering because it can allow them to set money aside for education while keeping more control over the funds. Marie also spoke about the estate planning features of education bonds, including the ability to have a bond guardian involved if the bond owner passes away.

That kind of structure can be helpful when a grandparent wants the money to be used in a particular way, or when they want to support more than one grandchild over time.

This is definitely an area where advice matters, because family money can become complicated. Depending on the circumstances, there may be tax, estate planning, Centrelink or fairness issues to think through before anyone starts moving money around.

Should you start planning before you know which school your child will attend?

You do not need to have every school decision made before you start planning, and in many cases, starting before everything is certain can actually give you more options later.

You may not know whether your child will go to a government, Catholic or independent school. You may not know whether they will go to university. You may not know whether they will need tutoring, specialist support or help with a first home deposit one day.

That uncertainty is normal.

The point of planning is not to lock your family into one path. The point is to build flexibility so you have more choice when those decisions become real.

If your child is still young, you may have time to build a dedicated pool of money. If your child is already in primary school or high school, there may still be opportunities to plan for future fees, university or other life goals.

It is rarely too late to make a better plan, but it does become harder when every decision is being made under pressure.

When should you get financial advice about education costs?

You should consider getting financial advice if education costs are starting to feel like a major financial commitment, or if you want to help your children or grandchildren without putting your own financial future at risk.

This is especially important if you are deciding between school options, wondering whether to use your offset account, thinking about investing for your children, receiving support from grandparents or considering whether an education bond makes sense.

A good advice process should help you understand what the costs could look like, how much you can realistically afford, what impact the decision may have on your mortgage and retirement plans, and which funding structure best fits your circumstances.

Because this is where families can get caught.

A school might look affordable when you only consider the first year of fees, but the bigger question is what happens over the full journey. What happens when fees rise? What happens if your income changes? What happens if you have more than one child going through the system at the same time?

Those are the questions worth modelling before you commit, not after the bills have already started landing.

The aim is not to make education costs feel scary

The aim is to make the decision clearer.

Most parents are trying to give their child a good start while still keeping the rest of the family financially steady.

That balance is possible, but it usually needs a plan.

The right strategy might be very simple. It might be using your offset account more deliberately, setting up a separate savings plan, investing over a longer time frame, using an education bond, or combining a few different approaches.

What matters is that the strategy suits your family, rather than creating another layer of stress.

If you are thinking about school fees, university costs or helping your children or grandchildren get ahead, it is worth getting advice before you make big decisions.

Want advice on funding your child’s education?

I’m Nick Donato, financial adviser at Guidance Financial Services.

If you would like to understand your options and see how education costs fit into your broader financial plan, you can book an appointment with us below.

This article is for educational purposes only and does not take into account your individual circumstances. If you would like tailored advice, we can help you work through the numbers properly.