16th September 2015
As featured in
Money Makeover: Deputy headmaster Tim Jefferis and his wife, Jo, save a fortune living in school. But can they see their children through their expensive private eduction and still afford a house?
Tim Jefferis 39, and his wife, Jo, 40 are the first to admit that they live "incredibly institutionalised" lives.
They both work at Oswestry School, a boarding school in Shropshire, with Tim earning £48,000 a year as the deputy headmaster, and Jo earning £25,000 a year as a class mistress.
During term time they are able to save £20,000 a year through using the school's facilities.
Instead of cooking they eat the school canteen food for breakfast, lunch and dinner. They don't pay bills such as water, gas and electric all year round either, as they live in an onsite house provided by the school.
These savings help, along with £15,000 a year from grandparents, to pay for the £30,000-a-year private education of their two teenage children, Ruth, 16 and Jacob, 14. They began their education at the local state primary, but are currently boarding at separate schools in the local area which both have basic fees of around £15,000 a year.
Tim said: "What motivates me to send them to private school is teaching at a good school myself. I see the value of it, and I don't want my kids to resent me for not sending them to one. I want to give them the best opportunities, the best contacts. School isn't somewhere you go to and come home. It becomes your life."
The Jefferis live relatively frugally. They go on holiday once a year and limit their children to one big school trip a year, as these are expensive.
The Jefferis' main financial concern is the cost of their children's education, including university, and the fact they do not own a home of their own.
They don't need a house now as they live for free at the school, but may want one in four or five years' time if Tim gets a new job elsewhere. At the very latest they will need to own a home by the time they retire, hopefully in 25 years when Tim and Jo turn 65.
They have both paid into teachers' pensions, with Jo making up for the years she took off to have children with additional voluntary contributions.
They also have £95,000 in cash from the sale of a previous property, and they are saving £100 a month towards buying their future home. To get the kind of family home that would suit their needs they'd need to spend around £350,000 in today's money.
Tim would like to know how to invest the money, given that his appetite for investment risk is "moderate".
He said: "We don't want to end up worse off than we currently are, but sometimes wonder whether we have taken enough risk in the past.
"We have been very fortunate to have spent most of our married life living in school accommodation, with no bills to worry about, and yet don't seem to have much to show for it as we enter our 40s.
"We would like to own a proper 'grown up' house sooner rather than later, but realistically finances won't allow us to do this until our youngest has left university in eight years."
Jonothan McColgan, director at Combined Financial Strategies, said:
You have stated that you want a house valued at £350,000 today by the time you get to age 65.
One of the options would be to buy your retirement home now as a buy-to-let. Spend just enough to maintain it in good enough condition to be a desirable rental property rather than what you would want from living in it.
Then use your tax free retirement lump sums from your pensions to help renovate it when you retire.
I have worked out that you could possibly get buy-to-let borrowing of up to £225,000, allowing you to afford a property worth £300,000.
I would suggest you go for a 25 years repayment buy-to-let mortgage to ensure that all the debt is fully repaid by the time you retire. Your mortgage costs would be around £1,000 a month for two years, increasing to around £2,000 a month thereafter. So it is unlikely that your rent will be sufficient to fully cover these costs.
This approach would fully eat into your current monthly savings of £100 a month and stop you from additional retirement planning until Ruth and then Jacob leave university.
The other option you have is to invest now and buy the property later.
You have £95,000 in savings, £25,000 of which I would recommend keeping as emergency cash, which leaves you with £70,000 to invest now.
Assuming investment returns of 5pc a year, charges of 1.5pc and inflation of 0.5pc, it's unlikely, if you invested this in the stock market, that this would grow to reach £350,000 in 25 years. I estimate it would take about 30 years to arrive at this value, and this does not take account of house price inflation.
However if you include the monthly savings you are expecting to make over the next four to seven years you could achieve an investment fund of around £645,000 by age 65, in today's money terms. This should be more than enough to afford your dream retirement home.