Sport teaches life s lessons. But there s no substitute, in my book, for education, because that gives you choice.

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1 Education funding Sport teaches life s lessons. But there s no substitute, in my book, for education, because that gives you choice. Professor Fiona Wood With entry to the top educational institutions becoming more and more competitive and the costs continually rising, it s important that you plan ahead so that your children get the best possible start in life. In line with a great many Australian expatriates, your child may wish to return to Australia for their university education. Apart from family and cultural links with home, Australia s mix of high calibre universities and attractive quality of life contribute towards making it the world s third most popular destination for international students after the US and the UK, both of which have much larger populations. An impressive 33 Australian universities feature in the QS World University Rankings 2014/15, with all members of the Group of Eight (Go8), a coalition of leading Australian universities, appearing in the top 100. ANU (Australian National University) in Canberra is the highest ranked, at number 25.

2 You will want to consider all the implications and costs up front, as a university education can be expensive in any of the countries that enjoy a global reputation for excellence. While there are the more obvious tuition and course fees, room and board, living and travel overheads to consider, there are other important factors to take into account, such as some courses requiring specific equipment. If your children want to live on campus, or if living in halls of residence is mandatory in the first year, accommodation costs can be high. The good news is that if your children are Australian citizens then they will be regarded as domestic rather than international students regardless of their current expatriate status. So their tuition fees will be significantly less costly for you, as all domestic undergraduate students enrolled in a degree or other award programme are commonwealth supported. This means that the Australian government pays the majority of their yearly tuition fees and only the remaining balance is the student contribution. Student contributions for some courses can be over AUD 10,000 per year, but most courses are less than that. In addition, as Australian citizens, your children can defer their student contribution through HECS- HELP, a loan scheme provided by the Australian government, repaying their loan through the Australian taxation system once their income is above the minimum repayment threshold. These costs are likely to increase over the coming years as the Australian Government confirmed in its May 2014 budget that universities will be deregulated in 2016, provoking concerns of an explosion in tuition fees. Some universities have already removed their caps on annual fee increases, even for students who remain on the same course. Recent research indicates that Australia already has the most expensive universities for international students, with annual costs, including fees and cost of living, above those of the US and UK. 1 You may also want to consider that your children may choose to study at a university outside Australia. Growing numbers of expatriate students are attracted to countries that enjoy strong reputations for the quality of their education and lifestyle, such as the US, Canada or the UK. Tuition fees alone at the top US universities are currently around USD 45,000 (AUD 56,600) per year with very few institutions offering financial aid or scholarships to international students. Canada s universities generally charge lower tuition fees than in the US and UK, but the fees for many courses at the top institutions for international undergraduate students are over USD 30,000 (AUD 37,733) per year. Tuition fees for international undergraduate students in the UK can be over GBP 36,000 (AUD 68,290) per year, resulting, for example, in overall expenses of a minimum of GBP 114,000 (AUD 216,265) to send your son or daughter to the University of Cambridge for a three-year degree. However, providing the quality education your children deserve could be more affordable than you think, as long as you plan your savings in advance. ¹ Independent research study commissioned by HSBC and carried out by Ipsos MORI January Friends Provident International Education funding

3 University costs at a glance 1 Tuition fees College fees For domestic Australian students attending ANU, the student contribution to their undergraduate degree course tuition fees starts at AUD 6,152 per year and rises to AUD 10,266 per year for many business and medical courses.² In addition, full-time domestic students pay a services and amenities fee of AUD 286 per year. Living resources The minimum living resources needed per year are estimated to be approximately AUD 19,000, depending on the individual s lifestyle.³ You should allow for increases in costs in subsequent years. Planning for the cost of university This means that it will cost you approximately AUD 90,000 to send your son or daughter to ANU to study for a three-year business or medical degree. You would need to have put by almost AUD 5,000 each year from the day your son or daughter was born until the age of 18 to meet that cost, assuming no growth. You could also plan for the impact on your costs of supporting your son or daughter studying in a country other than Australia, for instance, by taking the overall minimum cost of GBP 114,000 (AUD 216,265) to send them to the University of Cambridge for a three-year degree.⁴ You would need to have put by GBP 6,333 (AUD 12,015) each year from the day your son or daughter was born until the age of 18 to meet that cost, assuming no growth. Alternatively, if you had taken out a plan which achieved its aim to grow at an average of 5% each year (after fund and product charges), you would only need to have invested a lump sum of GBP 29,086 (AUD 55,178), or made a regular, annual payment of GBP 2,369 (AUD 4,491), from birth to age 18, to meet the cost of studying at ANU. To fund the cost of studying at the University of Cambridge, you would only need to have invested a lump sum of GBP 47,369 (AUD 89,808), or made a regular, annual payment of GBP 3,859 (AUD 7,321) from birth to age 18. Please remember that investment involves risk. Fund prices may go up and down and you could get back less than you paid in. ² ANU, December 2014, ³ Australian Department of Immigration & Border Protection recommends budgeting AUD 18,610 per year to cover the cost of a single student living away from home in Australia, ⁴ University of Cambridge, December 2014, 3

4 The benefits of saving early Many employers help with the cost of private education as part of an expatriate remuneration package but it s rare to be offered assistance with university fees. If you didn t start saving for your children s education at their birth, it s not too late, but the sooner you start investing, the less it will cost, especially if you have more than one child. With some careful long-term planning, you can put effective arrangements in place that will help you to ensure that your children fulfil their potential. Without these, the impact could be the difference between receiving a university education or not. If you have a lump sum to invest now, you could help support your children s education by investing in a single premium bond. Wise investment into a range of carefully-selected funds over the long term could result in a substantial contribution to their university fees. You could also top up the bond as and when you have the money available, for example, after you receive a bonus or dividend. If you don t have a lump sum to invest now, you may prefer to save on an ongoing basis, through a regular savings plan. Allocating a set amount each month gives you the control to manage your money in a disciplined way, paying an agreed cash sum into the plan on a regular basis. Whether you prefer a single premium investment or a regular savings plan, either option will give you the control and flexibility to make financial decisions at a time that s right for you. American research shows that the level of educational achievement is directly linked to expected lifetime earnings. 5 High school graduates USD 1.3 million Bachelor s degree USD 2.4 million Doctorate degree USD 3.5 million With a university education offering the potential to earn so much more, saving now for your children s future could be the best investment you ever make. Whatever career choices your children make, if you have committed to realistic financial plans for their education, you can rest assured that you have laid a strong foundation for their future. 5 United States Census Bureau, Work-Life Earnings by Field of Degree and Occupation for People With a Bachelor s Degree: 2011, October 2012, 4

5 Safeguarding your children s education funding You might also want to consider safeguarding your children s education should anything happen to you and you become unable to meet your financial obligations. Taking out a life cover, critical illness cover and/or total and permanent disability policy should enable your children to complete their education, even if you are not able to be there in person and share in their success. For example, you could ensure that the GBP 114,000 (AUD 216,265) minimum cost to send your child to the University of Cambridge for a three-year degree would be covered in the event of you becoming disabled or dying. Life insurance cover with total and permanent disability benefit for an insured sum of GBP 114,000 (AUD 216,265), starting from the birth of your child when your savings amount is relatively low and lasting for 18 years as you build up your education funding savings, would typically result in monthly premiums of just GBP (AUD 21.92). 6 6 Premiums based on providing decreasing term life cover for a 35 year-old British male expatriate, non-smoker, living in Dubai, 18-year term, 7% interest rate. 5

6 Visit our website to learn more about our range of flexible savings, investment and protection plans. Speak to your financial adviser today to see how we could help you secure your children s education. About Friends Provident International We are a leading financial services provider, with a reputation of trust, commitment and integrity, offering financial solutions to customers throughout their lives. As part of the Friends Life group, we share a heritage that dates back over 200 years, with over 35 years of international experience. All currency conversions correct at time of print, January This document is for information only. It does not constitute as investment advice or an offer to provide any product or service by Friends Provident International and other companies within the Friends Life group. Please seek professional advice, taking into account your personal circumstances, before making investment decisions. We can accept no liability for loss of any kind incurred as a result of reliance on the information or opinions provided in this document. Friends Provident International is a trading name of Friends Provident International Limited and Friends Life Limited (for business conducted outside the United Kingdom). Friends Life Limited: Registered office: Pixham End, Dorking, Surrey RH4 1QA England. Incorporated company limited by shares and registered in England and Wales, number Friends Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Member of The Association of International Life Offices. Friends Life Limited is authorised by the Prudential Regulation Authority to carry on Class I and Class III business in Cyprus and Malta. Friends Provident International Limited: Registered and Head Office: Royal Court, Castletown, Isle of Man, British Isles, IM9 1RA. Incorporated company limited by shares. Registered in the Isle of Man, number Authorised by the Isle of Man Insurance and Pensions Authority. Provider of life assurance and investment products. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Authorised by the Office of the Commissioner of Insurance to conduct long-term insurance business in Hong Kong. Registered in the United Arab Emirates as an Insurance Company (Registration No. 76). Registered with the Ministry of Economy as a foreign company (Registration No. 2013): Registration date 19 April Authorised by the United Arab Emirates Insurance Authority to conduct life assurance and funds accumulation operations. Registered in Singapore No. F06835G. Licensed by the Monetary Authority of Singapore to conduct life insurance business in Singapore. Friends Provident International is a registered trade mark of the Friends Life group. GE XP AUS SA EDU (46367)