School math student

The numbers tell the story.

A friend has been trying to decide whether to send their child to the local Catholic school or the local private school. They asked me to do a few numbers. So I did.

It turns out that the difference in fees between the two schools in question from year 7 to year 12, assuming all other costs are the same, is the difference between $158,830 at the private school and $32,730 at the Catholic school, which is $126,100. Clearly about $20,000 a year saved.

That's after tax, of course, so depending on your tax rate it will cost more. For a 45 per cent rate taxpayer it's about $160,000 pre-tax.

Now let's make a more realistic assumption: that you are borrowing the money off your mortgage or investing the saved money. In both cases let's assume a mortgage rate of 7 per cent and a total return of 7 per cent. On that basis, over the six years the extra cost or saving is actually $160,879.

More worryingly, if you don't then pay that debt off and keep it on your mortgage for another 10 years and compound it at 7 per cent, then, by the time 10 years is up, the decision to send your kid to the private school instead of the Catholic one would actually have cost you $316,473 per child; and if you didn't pay it off for 20 years, $622,550.

On the flip side, if you don't have a mortgage and could have earned 7 per cent on the money saved, the numbers are the same in reverse. Your super fund could be worth $316,473 more per child after 10 years and $622,550 more per child after 20 years.

And all this is before you factor in a rise in school fees. You can add another 5 per cent-plus a year for that.

I don't know why, but school fee inflation appears to have nothing to do with inflation in the rest of the world, unless of course you're in Zimbabwe.

The bottom line is that if you have a choice between a fee-paying Catholic school and a private school, there had better be a pretty good non-financial reason for you to pay the extra, because it's a lot.

Maybe you'd pay that for the history, reputation, connections and networking of going to Eton with princes Harry and William, but a suburban Australian school? Really?

Maybe you'd pay it for a better academic performance, but research says there is little academic advantage in privately paid schooling anyway, Catholic or otherwise.

I asked for feedback on this article from my Marcus Today members. A lot of it was about there being little evidence of any academic advantage going to any of Australia's ''three tier'' schooling system (private, state, Catholic), so why pay?

But the best argument I heard for not paying was that schools provide only one element of your child's education, the schooling. But what about the rest? If parents are prepared to engage with their child's education beyond the school walls, then $20,000 is a tremendous head start on giving your kid a more worldly experience and opportunity through travel, extracurricular sport and hobbies and other education and training beyond the bounds of the school walls.

The best argument against, of course, was that it is a religious question. The word ''Catholic'' gives it away.

Of course you'd also save a lot more sending your kid to a state school; and if there is little academic advantage in privately paid schooling anyway, why not? In the end, our family's experience so far has been that the choice of school ''depends on the kid'' and I'll give Australia one thing: we've had a lot of choice.

Finally, as one Marcus Today member summed it up: ''Fortunately most of life's big decisions are not purely financial; if they were, we would not be having this discussion because we would have chosen not to have children, they are far too expensive.''

Hear, hear. The truth is many people are crippling themselves financially trying to do what's best for their children when what's best, engaging with their education, may actually be a lot cheaper.

Marcus Padley is the author of the sharemarket newsletter Marcus Today. This column should not be construed as personal investment advice.