#78: Mini podcast: Discounts vs investments

Episode of: The Fat Wallet Show from Just One Lap

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Dec 10, 20176m
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#78: Mini podcast: Discounts vs investments
Dec 10 '176m
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Fat Wallet listener Hugo Schuitemaker and his trusty Excel spreadsheet made a startling discovery. An amount invested at the beginning of the year would have to earn a 19.5% return to catch up to a 10% discount on his child’s school fees.

“Sometimes schools offer a discount for paying the full annual amount upfront. In my case its 10% if I pay the full annual amount of school fees by 1 January. So this naturally called for an Excel spreadsheet. Upfront payment vs Monthly payment.

I worked out that the 10% discount is a huge savings for me. If I chose not to make use of the discount and paid the monthly amount, whilst keeping the balance of my capital invested, I would need to make a return of 19.5% over the year, just to equal (break even) with the discount I would receive from the school! It’s a no-brainer for me.

I would even argue that if you can loan money at an interest rate of less than 19.5% (out of you bond for example), with a 10% discount on school fees it would be in your best interest (excuse the pun) to do so…”

In the first of six holiday mini podcasts, Simon and I discuss the merits of taking a lump-sum discount instead of investing it. We also drink some bubbles and eat popcorn. Yay, holidays!

School fees discount calculator

Kris

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