Bind ed­u­ca­tion funds in chains

Element - - Finance - Adam Gif­ford Per­sonal fi­nance

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.

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