Hard lessons may need to be learned to keep up school fees

I HAVE two children in private education. As a result of the recession, and especially inflation hikes, finding the money for fees is increasingly difficult.

As the children are sitting exams this year, I do not want to disrupt them by moving schools. How can I make my money work for me so that I can continue to pay the school fees? I earn approximately 70,000 a year.

SW, East Dumbarton

AFrom the limited information provided, it is impossible for me to know the ages of your children and, therefore, how long the requirement to fund fees is likely to continue. I cannot therefore know whether your issue is short-term in nature or likely to continue into the medium term. However I suspect the latter as you must also consider their requirements for further education.

As you advised that you receive an annual salary of about 70,000, I presume that you fund the fees from earnings rather than from assets. If this is the case, it precludes investments, as your budget is already tight and you require all spare income for the fees themselves. In this situation, you are wholly dependent on continuing employment and, hopefully, salary increases to continue as you are.

There are some potential options open, however. You should establish whether you have any sources of capital that you could draw from. For instance, if you have investments of any nature, could they provide a regular income or allow access to capital? If you are over 55, you could consider either drawing some tax-free cash or income from any pension provision you have.

Although it is never ideal to use savings for retirement for a purpose such as school fees, it may give you the additional sum you require. But you should consider all other options before proceeding as taking tax-free cash and/or income from a pension now will reduce the income you receive in retirement.

If there is equity in your house you could, subject to agreement from your lender, consider remortgaging to provide a lump sum to pay school fees. You may receive a discount for paying as an up-front lump sum. This further advance would then be repaid over a mortgage term. This solution is obviously less than ideal as, subject to term and interest rates applicable, your repayments are likely to significantly exceed the amount you borrowed. In addition, your home may be repossessed if you do not keep up repayments on your mortgage.

A less radical approach could be to cut out non-essential monthly spending. Unused gym memberships or daily lunches and coffees can amount to a significant sum each month, all of which is from taxed income.

If all else fails, I would urge you to be realistic. If something is unaffordable, even after sacrifices have been made, hard decisions sometimes have to be taken, even if this means your children moving school.

• Stephen Hall is a financial adviser within the private client and financial services division of HBJ Gateley Wareing.

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