August 21, 2012, 5:00 am

Private High School – Do You Pay For That?? What’s Your Take?

by: The Financial Blogger    Category: Assets and Net Worth
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Holly smokes… I just realized that I’m not done with my budget! After feeling much better about my net worth yesterday, I had this unexpected conversation with my wife. This is when I realized that my oldest son is 7… yeah I knew that already, but this also means that in five years, he’s hitting high school.

 

And high school means one thing for me: it means private school! The conversation I had with my wife was around the price of private schools in our area. We are pretty lucky since we have three options:

–          International school (pretty much same cost as public school but you need great grades to be accepted)

–          $3,500/year private school &

–          $5,000/year private school

This is when I realized that I didn’t have a penny saved for that. Kudos to me, my kids will have 30K each to finance their university. But what happens before that!?!? Darn! And I can’t use theRESPfor high school… this is when I start thinking that I need a funding strategy…and fast! Because “goods news” like this doesn’t come alone, I also realized that I had a few other expenses to take care of in the upcoming years…

 

Private School

 

As I just mentioned, this is definitely the biggest expense I’ll have to plan for this in the near future. The cheapest option is the international school but I don’t know if my children will want this or be qualified to go there. So I’ll have to budget for the second best option; the $3,500/year school. I’m not going to actually go see both private schools right now since management can change a lot in the next five years and I’ll decide at that time which school is best for my kids. In the meantime, I need to find money! Here’s what I need:

 

3 kids x 5 years at private schools x $3,500 = $52,500!

 

Fortunately, I need that over a period of the next 15 years :-D. But my main problem is exactly in 7 years when both my oldest son and my daughter will be at private school. At best, I’ll need 7K per year. At worst, it will be 12K! But let’s keep the 3,5K option for now. Just to keep a smile on my face for a few more years!

 

I’ve calculated that if I start now to invest $200 per month, I’ll have roughly $13,000 in five years. If I keep the same budget of $200 per month, this makes $2,400 available for private school. If the cost is $3,500, this means that I only have to withdraw $1,100 per year from my school fund. This will last for 2 years and then, I’ll have to withdraw $4,600 ($7,000 for two kids – $2,400 that is already budgeted). According to these calculations, when my oldest son will finish private school, my school fund should be at $0 and I might have to dip into my pocket for the last year. Then, I only have one kid remaining in private school. When my daughter will finish, we will have a 1 year break before my youngest starts.

So technically, I would need to start this $200/month fund ASAP if I don’t want to be in the deep in five years! Hmmm… this smells like a 2013 goal!

 

Are you willing to make such a sacrifice for your children? Do you plan on private school? I’m curious to know what you think about that.

 

A New Car

 

No… I don’t expect to buy a new car shortly. In fact, I hope not to have to buy one in the next 5 years. At that time, my Tribute loan will be paid off and I could sell my RX-8 and get another car loan. It sucks but I don’t think that my old sports car will be in good shape after 200,000+ km and 11 years under its hood. The goal is to have only one car payment at the time. In 3 years, my Tribute will be 6 years old and should have about 100,000 km. That means it will be good for another 5 years… just enough time for me to finish paying off my second car. Ugh… I really don’t like where this is going.

 

Is there any way I can save on car payments or am I stuck with this stupid logic of always having a car payment in my budget??? I need your help for this one!

House Maintenance (It’s starting in 2013!)

 

Starting next year, I’ll have to repaint a few areas of my house. The house was built in 2005 and nothing has been done inside since then. It definitely needs to be refreshed. Then, I have another problem; I only have 3 bedrooms on the second floor but I have 3 kids. My toddler will eventually share a bedroom with my daughter but it’s not optimal (due to the fact that they are a boy and a girl and there is a 3 ½ year difference!).

 

I’m not quite sure where I’ll be heading with these expenses as well… it kinda sucks actually! I think I’m going to delay the renovations in my basement for a year or two in order to put a few bucks aside and not have to remortgage my house to renovate and create more bedrooms. Now I get why people are constantly refinancing their mortgage to meet their needs. This sounds like a great budgeting challenge to be able to afford any lifestyle changes in your house with your own pay check.

 

Fortunately, I’m expecting to grow my income significantly in the next five years. This is still my best bet to cover all my expenses…

 

How do you do it? Am I missing something here??

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Comments

I’m seeing life style inflation in this post TFB.

Don’t buy a new car – in fact, get something really used that you can pay for in cash with a reasonable maintenance fund on the side. Don’t be worried what your clients/coworkers think when you pull up in a neon 🙂

What are the gains with private school? If you went through the public school system and are this successful would you have been more off in private school?

Private schools are used as bragging rights to other parents. For social status. The same as a nice car. Props if you will 😛

Kids are smart because of what the parents teach them, not the schools.

Just my opinion though.

Yep, I’m a little lost too, why the need for a private high school? I know some kids do better in them, but that is largely a personality thing and their interests. Given your kid is seven it seems a little early to assume that yet. Most kids are just find in a public school as long as you pick it based on programing rather than the kids saying but my friends are going to school X.

Also I’m a bit more likely to save the cash on high school and pour the money into post secondary instead. No one gives a crap what high school you attended after you get a degree, so why the investment?

Tim

Lifestyle inflation does seem like it is creeping in. Are public schools where you live that bad? Do they really make a difference for college there? If not… why pay?

I used to be a huge pro-public education snob. OK, I still kind of am because I think that value-for-money is extremely high, at least at Canadian high schools.

The difference is that I now believe, “People should send their kids where they want,” — so long as parents have the money, of course.

What changed my mind? The reality that there are worse evils, like home schooling.

Long time reader, first time commenting.

I don’t understand why you want to send your kids to private schools only. Are public schools really that bad around where you live?

My son is 16 and we went through this decision process a few years ago. Eventually we sent him to the private school.

Prior to high school he was in the “accellerated” (gifted) stream at school, but he was not challenged as much as we thought he should be. But we are not whip cracking parents! We could just see he was starting to tune out from boredom.

Because you have to move quickly, we ended up making the decision with his input. the private school let him skip a grade, as they thought he was at that level already (with one exception – math). He was supportive of that move and excited to start school again (2 years ago now).

Cost is similar – about $3500/yr but with the extras its more like $5K. Since we felt we needed to do it, we just had to make adjustments elsewhere. A little less on the vacation plan, a little more DIY, etc. If you are committed, a cost like that can be managed if you are in a decent place to start.

Personally I would rather give up part of my financial plan than live with the regret of what might have been re: my kid. My grandmother lived with that regret her whole life, that she didn’t do all she could. It was sad.

I’ve thought about sending my son to a private school before. It is mainly due to private schools have less BS rules and more freedom than public schools.

We’re planning on sending our son to Loyola and our two girls to one of the associated girls schools, most likely Sacred Heart. These schools cost around 9-10K$ per year. I did exactly the same analysis as to money to save and then spend over the 12 years the three kids will take to pass through high school. I’ve got three tough years where two out of three will be in high school at the same time, fortunately not a year with 3 of 3.

We are saving monthly only a part of what it will cost, we will make up the balance when the time comes with a combination of bonuses earned, home business income and financing.

I went to Loyola when I was in high school and I found it profoundly affected my life positively. Would I have been so affected at a public school? I don’t know. From what I understand, it is hit or miss in public schools but more sure in private ones.

We are talking about the same thing. Currently my daughter goes to a private grade school, and we get a 50% discount, making it only $1,600 per year.

The private high school is about $7,000 per year, and I don’t know how I’m going to be able to afford it, or if it’s even worth trying. I have two kids to worry about.

This is a tough one, because if I can’t send her and all her friends go, I will be hated.

hmmm interesting post.. For schooling i always figured it comes down to how motivated the child is.. doesn’t matter what school they go too.. in the end it comes down to what they want.. of course this is coming from a guy with no kids..

“Is there any way I can save on car payments or am I stuck with this stupid logic of always having a car payment in my budget??? I need your help for this one!”

Not sure if your being serious with that statement… Buy used 3-5yr old car.. 100% cash.. simple solution..

by: The Financial Blogger | August 21st, 2012 (10:18 pm)

Wow! the first thing I have to say is :”your comments are awesome!”. I just came back from a round of golf so I’ll answer everybody’s’ comment here:

@Ottawa Guy:
my RX-8 is actually a used car and it is also the car that had cost me the most in 2012! never underestimate the cost of repairs on a used car. But I will buy another used car in 3 years once my RX-8 will be… 11 years old!

@Tim:
I’ve been to private school during high school while most of my friends went to public school. I was able compare both and I wasn’t impressed by what public school could offer in term of programs, materials and quality of teachers. This is why I want my kids to go to private school; mostly because the public system in Quebec is declining compared to the private system. I want to make sure that my kids like school and I believe they will have more reasons to do so in a private school.

@Lance:
if I budget the private school, I don’t really mind about lifestyle inflation. I wanted my kids to go to a private school before I even had kids!

@Joe:
I think kids need to socialize and I don’t think home schooling is a good idea… unless you want to do it for one year on a boat in the Mediterranean sea 😀

@Tawcan:
thx for following me 🙂 I hope my comments below answer your question. I truly think that private schools are better than public ones (from my experience anyway!).

@Bill:
I think education is one of the greatest estate you can give your kids. Teach a man how to fish and you feed him for live 😉

@Squeezer:
another reason is that private school can also offer a lot more. In my city, there are sports concentration and travel concentration where kids do 1 big trip (i.e. another country) per year! This is the kind of experience that open your mind for the rest of your life!

@Phil:
great job on budgeting this future expense! I guess it won’t hurt your budget too much when it will be the time to write those checks!

@John:
You can ask for your family to help. I remember that my parents asked for help for my last 2 years at high school and it worked.

@30Kto230M
this is what I did with my RX-8 2 years ago. in 3 years, I will have to buy another car. I either have to save for three years in order to have the cash or to take a small loan in three years. The result is the same: a monthly payment (or saving) dedicated to cars all the time. I remember when I had only one car, it was easy to keep the car “pmt free” for 2 years but now that we need 2 cars, I don’t see it happen anymore…

thx guys, great conversation today! whoa!

Hi Mike,
+1 for the “lifestyle inflation” comments. You are writing checks based on big increases in anticipated income over the next five years, which may or may not happen. If it DOES happen, I predict you will find further new + shiny things to spend your money on. If it DOESN’T happen, well, the emotional letdown can be quite severe.

Want to save money? Is money your top priority? Then homeschool your kids, buy 6-year used Honda Civics, and don’t add any expansions to your house. Use the basement or a study for the bedroom, come on you’re creative you can come up with a way. Oh, and pay off your debts. I don’t think you should have gotten a pool.

Sorry if this is being too tough. But I’m pushing you to the greatness you are capable of being. And part of that is candor.

by: The Financial Blogger | August 22nd, 2012 (9:46 am)

Hey Jason!

You’re not too tough, I like honest comments :-).

I made very bad budget calculation for the pool and it’s true that I shouldn’t had bought it this year.

Currently, I don’t need any income raise to maintain my lifestyle. I need to be stricter on my budget thought and this is where I’m having a lot of struggles.

Being debt free is not my priority. If it was, I would have sold my house, bought a smaller one at 225K and I would be completely debt free in 5 years. But I enjoy my house and as long as I can pay for it, I will keep it. I won’t have to do major renovations in 2013 in my house but I will need a few thousands to finish a bedroom in my basement for my older son 🙁

How many year the 6 yr used Civic will last Qc’s crazy weather? not more than 5 years I guess this is why I will always have to change one car every 5 years anyway. I don’t intend to buy new but the problem will still remain; monthly car payments required!

Point re: Civic in Quebec. And if being debt free is not a priority then I applaud you knowing that.

The best car I ever owned was a BMW 328i I bought, six years used with 108k miles on it. Maintenance was expensive, and insurance was expensive for a couple of years. But within four years it was paid off..the car lasted me for six. And it would have lasted longer, except I left San Diego and moved to NYC. My original intention was to run it into the ground. And there were two problems I ever had with it: 1) the battery just got up and died. $90 replacement, and 2) the radiator hose cracked and started leaking. AAA plus a trusted relationship with a service center = minimal damage.

Find the car that works for your area (and it is NOT a BMW! rear wheel drive..). But if you buy used, you will save by far the majority of your costs. For budgeting purposes, probably want to factor in a car payment even if it is paid off…that way for those months/years when you don’t have one, it’s extra $$$ to put into investments. Just my take.

Nice to hear from you Mike.

by: The Financial Blogger | August 22nd, 2012 (10:20 am)

My first car was a BMW 320i 1981 and it was the best car I ever had. Unfortunately, I had to sell it once it wasn’t starting anymore 😉 hahaha! I’ll do my research for my next car. Hopefully the RX-8 can last 4 years and I can have 1 year car payment free!

I’m a public high school teacher and a private school would have to offer me a bundle to move. Way back in teacher ed I don’t remember the teacher candidates lining up for the private school jobs first. Great teachers in both systems. Don’t give up on the public system.

FYI just bought a one year old loaded Mazda3 for just over half of what it sold for out of the dealership. Why ever buy new?

The irony of your answer is that you don’t consider the option of choosing not to buy a car until you can pay for it .. with cash.. otherwise known as when you can afford one.. hence the danger of relying on credit, debt, borrowing..

bad financial decisions are just compounded when you borrow and use debt to fund it.. instead of just damn that was a dumb choice and i lost x amount learn and move on.. you give up some freedom and flexibility..

by: The Financial Blogger | August 22nd, 2012 (9:33 pm)

@30K,
I need a car to work so if my car doesn’t start anymore in the morning, I don’t have a job anymore. This is why I need to figure out that once my “old” car hits 200km, I need to think about replacing it. it’s not really a choice or lifestyle inflation. just this year, the fact that the car went 5 times to the garage was a huge hassle in term of time management.

This is why I’m thinking ahead and start thinking about putting money aside to buy the next car. But putting money aside or paying down a car loan is about the same thing (besides it’s cheaper since you don’t have to factor the interest rate). in the end, your monthly budget does include money for your car in both ways…

[…] presents Private High School – Do You Pay For That?? What’s Your Take? posted at The Financial Blogger, saying, “Would you spend money on private high […]

You always have a car payment because you still have a car payment. If you didn’t have that you could be saving up the same amount (or a bit less because of the difference in interest) for the next replacement to avoid taking out a loan. So whichever side you’re on is where you will stay unless you do something big to change it. You might be able to do that if you just spend a year saving as much as you can, or sell the cars now and get something cheaper. If you like the challenge of figuring things out under pressure, there’s no problem with spending the money you’ll earn later 🙂

Well, we’ve got 4 kiddos to put through college. We’d like to put them through college prep schools, which are well worth it from my experience (although that’s about 20-25 years old now).
While I was in public school, I found that I rarely had to open the books to study and could easily maintain a B- or C+. Then there was the college preparatory school that I attended, which required my not only opening the books to study, but making sure to do the homework each and every day in order to maintain a C or C-
Some of the kids I’ve talked to in our area have said that the college prep schools that I’m aware of have changed slightly, but more so in the camaraderie portion as opposed to the actual level of education.