Bind education funds in chains
While parents and grandparents may want to help fund their youngster’s education, New Zealand doesn’t make it easy. Tuition fees range from about $5000 to $12,000 a year. Add living costs – Victoria University advises students to budget $18,000 for the 40-week academic year – and the debt can start to mount up. A counter on the New Zealand University Students Association website estimates student debt at over $12b. But there are problems in saving a few dollars a week for an option a child may or may not pursue. Unlike some other countries where paying for education has long been the norm, New Zealand does not have favourable tax treatments or specific education savings products. Diana Crossan, the head of the Financial Literacy and Retirement Savings Commission, was part of a group that tried in the early 2000s to set up a not for profit group that would help families save for their children’s education. “It had support from business, but the Government chose to do Kiwisaver and take the interest off student loans, which took some of the pressure off,” Crossan says. Some of the ideas from the FUNZ project live on in a Ngai Tahu scheme, which Crossan chairs. Whai Rawa is structured as a retirement savings scheme that allows members to withdraw money for tertiary education or to buy a home. Not everyone can set up a trust to fund a child’s education, and while individuals can set up an account for a child, New Zealand law also allows them to withdraw from it. “Four years down the track the washing machine breaks down and suddenly the 14-year-old has nothing in their education account,” Crossan says. She says a dedicated education account can create an expectation children will go to university or polytech. That is particularly valuable where parents have not had any tertiary education themselves, as children from such families are less likely to go on to higher education.