Finance: Paying for education

PHUKET: By far the biggest potential financial-headache for a young expatriate family is paying for the cost of an expat child’s education. After all, even large multinationals are increasingly scoffing at hiring expatriates with children or offering pay packages that include paying the full costs of international school fees, which can easily top 325,000 baht to 650,000 baht or more per child per year.

If your employer is not going to pay for the full cost of your child’s education, be aware that tuition is only one expense you may incur, as there could be other separate bills for transportation, mandatory school uniforms, extracurricular activities, school books and school lunches. You may also be required to sign a ‘debenture’ or rather provide a school with a non-interest loan for as little as a few thousand US dollars to as much as US$30,000 for the duration of your child’s education. And while scholarships or discounts may be available (for example, one spouse volunteers to work at the school), do not assume such tuition breaks will be offered to you.

So why are international schools so expensive? The best international schools will have expats as teachers who teach small classes, are usually located in upscale areas and provide high levels of security – characteristics that add to the cost of your child’s education. Remember, you get (or should get) what you pay for when it comes to an international school.

PAYING FOR INTERNATIONAL SCHOOLS

Even if you have an employer paying for most of your child’s education, make sure you know and understand what education expenses your employer will pay for (most likely basic tuition) and what ones your employer won’t pay for (such as books and school lunches). Likewise, you should make sure any severance package or clause is enough to cover tuition payments so that you are not forced to withdraw your child immediately from school should you unexpectedly be terminated or transferred.

If you are completely on your own when it comes to paying international school fees, remember that these fees will likely rise well above and beyond the rate of inflation and that the interest rates most investments are paying – especially as wealthy Asians increasingly opt to send their children to international schools in the region.

In the worst case scenario – short of the entire family returning home – you may need to plan on homeschooling your children, which will require big sacrifices by you and your spouse, or even sending them back home to complete their education.

DON’T FORGET TO PLAN FOR YOUR CHILD’S UNIVERSITY EDUCATION

If paying for your child’s basic education is not enough to worry about, you will also need to start early to save, invest and carefully plan for their university education – which becomes more complicated for long-term expat families.

For example: If you are an American expat who intends to send your child to a state college at in-state tuition rates, be aware that you may need to re-establish residency for your family or for your child by sending them ‘home’ for high school in order to qualify for lower in-state tuition rates.

However, be careful about re-establishing residency for your whole family, as it could also make your income subject to state income taxes, even if you continue to reside abroad; and don’t forget to take advantage of tax-deferred investment accounts intended for education expenses.

Finally, and if your family members have been expats for a long time, you might want to go as far as to consider other more radical options for giving them a university education rather than sending them back home. Many universities in Australia and New Zealand will now accept loans backed by the US Department of Education and other forms of financial aide from other countries, while foreign universities have increasingly set up campuses or programs in Asia to target the region’s middle class and professional class. Such education options might prove to be better and more affordable alternatives for your child’s university education.

Don Freeman, BSME, is president of Freeman Capital Management, a Registered Investment Advisor with the United States Securities Exchange Commission (SEC), based in Phuket. He has more than 15 years experience working with expatriates. Don specializes in portfolio management, US tax preparation, financial planning and UK pension transfers. He can be reached at 089-970 5795 or email: freemancapital@gmail.com.

— Don Freeman