Written

For

The

Australian

-

Grandparents

often

foot

the

bill

for

private

school

fees

but

there

are

options

Here's a statistic that might surprise you: private school fees have risen at more than double the rate of inflation over the past 20 years, with some year 12 fees now pushing past $50,000. For a family with two kids in private school on the top tax bracket, that means earning close to $200,000 pre-tax just to cover the fees — before the mortgage, before groceries, before anything else.

So who's actually paying? Increasingly, it's the grandparents. I've seen wealth managers report that up to 70 per cent of their clients are footing the school fee bill for their grandchildren. And in many ways, it makes sense. Retirees have ridden a wave of strong sharemarket returns and healthy interest income, while their kids in their 30s and 40s are getting squeezed by mortgages and rent increases of 20-30 per cent. Cap-in-hand conversations around the dinner table are becoming the norm — effectively an early inheritance.

My view? Gifting $200,000 towards school fees today is worth far more than leaving the same amount as a death inheritance when the kids are already in their 50s or 60s and don't need the leg-up.

If grandparents aren't in the picture, options exist but they sting. Unsecured school fee finance carries double-digit interest rates. A better route is usually refinancing the home loan and parking the extra funds in an offset account.

For those wanting to build a longer-term legacy, investment bonds are worth a look — capped at 30 per cent tax after 10 years. But the lesser-known education bond is the real gem. Structured as a "scholarship plan," the 30 per cent tax paid on earnings is rebated in cash when withdrawals fund education costs. Used correctly, it's essentially a tax-free structure — though it works best for university expenses, given the punishing tax rates minors face on unearned income.

Is private school worth it? A senior banker put it best to me: it gets your foot in the door, but if you lack talent, that door slams shut quickly.