The rising cost of private education is forcing many households to sacrifice long-term financial security and cut spending, new research from Rathbones has revealed.
A new report by the wealth manager suggests parents face a ‘double squeeze’ between supporting their children’s education and protecting their future finances.
Among families funding private school fees, more than a fifth (22%) say they have prioritised ISAs and long-term investments less in order to afford education costs, while 20% have reduced pension saving. More than a third (36%) have cut back on holidays and leisure spending and 29% have postponed home improvements.
Rathbones said the introduction of VAT on school fees is reshaping decisions around education. A quarter (24%) of families say they have absorbed the higher costs but with financial strain, while 16% have delayed enrolling a child in private school and 10% have moved, or plan to move, a child out of private education altogether.
Amanda Cook, financial planning director at Rathbones, said: “As families prepare for a new school year, many are finding that the true cost of private education extends far beyond the school fees themselves. The pressure is forcing households to make difficult trade-offs, with some reducing pension contributions, scaling back investment plans and dipping into savings to fund educational opportunities.
“The introduction of VAT on private school fees has amplified those pressures. While many families have chosen to absorb the additional costs, a significant number are doing so with financial strain, while others have delayed enrolment or changed their schooling plans altogether.”
The report also explores how families are adapting to rising university costs, which have come under the spotlight for leaving graduates with large debt.
Nearly seven in 10 (69%) parents who currently contribute, or expect to contribute towards university costs, expect to fund at least half of the costs. More than one in four (26%) expect to contribute more than £50,000 per child towards university costs, while 11% expect to contribute more than £100,000.
However, Rathbones said this is having a knock-on effect on parents’ financial security, with almost half (46%) admitting education costs are likely to affect their retirement planning.
Meanwhile, more than two-thirds (67%) say upcoming inheritance tax changes affecting pensions have increased their desire to fund education during their lifetime, while more than eight in 10 (81%) believe rising education costs are making life chances increasingly dependent on family wealth.
