Ask Paul: I’m a single mum, how can I afford private school for my child?

Dear Paul,

I am a single mum working as a teacher earning $77,000 a year with an additional child support income of $400 a week.

I wanted to know how I can send my child to private school starting from Year 7. I checked one local private school, where the fee is $24,784 in 2022.

I manage to contribute $1000 to an exchange traded fund (ETF) every month.

However, I heard about an educational fund that could avoid capital gains tax and tax in the long run. I wanted to use the dividends to pay off my child's tuition.

Where can I find more information on this? Like many parents, I would like to know how I should plan for my child's future educational expenses. - Scarlett

You know, Scarlett, I would argue you are doing the right thing with the $1000 a month going into an ETF. The idea of a fund with no CGT or tax would be just lovely for your child, but that world does not exist.

Your super is about the closest thing to investment and tax nirvana, but that is only available as you retire and of zero help with school fees.

The education-type funds you refer to are not my favourite. They are generally an insurance bond that pays 30% tax on investment earnings on your behalf.

Some that I looked at seem to focus on low-risk, fixed-interest investments, which, frankly, are pretty hopeless as a long-term investment. Fees and costs can also be a little opaque.

I'm also a little concerned about exactly how you can be certain about what they will pay for in the future and exactly what amounts they will pay.

I get a bit antsy about living in a nanny state, and prefer self-responsibility.

So my view is that you are doing the right thing by having funds in very low-cost ETFs, where the money is under your control and you are driving your own destiny.

The path you are on is the one that I would choose, and did choose for our children.

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