Why you should start saving for your children's education today

So if you happen to have a larger family and you're keen to educate them privately, you're looking at a spend equivalent to buying a house (and that's not even counting university.) No wonder we call education costs the 'second mortgage', and no wonder also that ASG found that 62 per cent of parents are concerned about the cost of supporting their child's future education.

For most people, education costs will be a long-term goal that may require five, 10 or even more years to achieve. This means that it makes sense to have your saving plan underway long before you've selected a school. You should start as early as you possibly can.

Once you've narrowed down your options a bit, at least to public vs private, calculate how much you'll need to put aside and for how long. You can use our savings goal calculator to help you figure this out.

Then let the saving begin.

"Consider asking payroll to set up a direct debit for a portion of your salary to go straight into your savings account," says money expert Bessie Hassan from comparison site finder.com.au. "You can't miss what you can't see."

Don't forget to adjust contributions each year for inflation, especially bearing in mind that Australian private education costs are rising by 5.5 per cent per year and have risen at almost double the rate of inflation over the last 20 years.

Choosing the right savings scheme for your education fund can help you achieve your goals faster. "Right now, we're seeing the lowest interest rates in history in Australia," says Hassan. "And that's bad news for returns on savings. That's why it's never been more important to compare what's on offer. Shop around thoroughly; use your loyalty at your bank as bargaining power. You deserve the right vehicle to grow your hard-earned cash."

Weigh up the pros and cons of options including term deposits, savings accounts, investment bonds and managed funds. Some savings plans are designed specifically for education costs; the ASG has a basic Education Fund for secondary and post-secondary costs, Supplementary Program for private primary, secondary and tertiary education costs and a Future Program that you can start even before your child is born. ASG also has a range of educational resources for parents and an annual school fee payment service that spreads school fees into manageable monthly or fortnightly installments.

Ask your family to help grow your education fund. "Instead of birthday or Christmas gifts, ask them if they can instead deposit money into the fund," says Hassan. "Those big cash injections can make a significant difference." 

If you've opted for private education, look at the scholarships and merit-based awards available for each school. If your child is eligible, make sure you know when to apply and what the process is.

Reassess your child's educational performance and goals at set points throughout their development because this might affect the type of school they're best suited to. Specialist or vocational schools come with varying price tags.

It's not just about the school fees. Whether you're going public or private, you'll still have to cover costs of uniform, textbooks, excursions and camps, musical instruments and more.

Older parents could consider using their superannuation as a savings vehicle for education costs. This might involve increasing your contributions to super via either salary sacrifice or after-tax contributions, then starting a pension fund when you're able to access your super.

If you are expecting an inheritance, consider passing it straight to your children, to be held in trust. This can also be a handy way of avoiding taxes payable on your inheritance if it were to be transferred straight to you. A financial planner can talk you through this option.

Teaching your kids about financial awareness will help them along their path and help them make better financial decisions throughout their lives.

You can get them started early with an HSBC Premier Children's Savings Account. It has lots of different options that adapt as your child gets older and (hopefully) more responsible.