Waterhouse started school in a small country town in South Australia before attending St Peter's College, Adelaide in 1860.
When the family moved to Maitland, New South Wales he attended Dr Frazer's Grammar School for a short period before being enrolled as a boarding student at Newington College in 1865.
While in Dungog tragedy struck on 29 October 1894 when Waterhouse's wife and daughter drowned in the wreck of SS Wairarapa on Great Barrier Island.
[11] He took on a school that had suffered as a result of the 1890s economic crisis and the degenerative illness of its first Headmaster, Joseph Coates.
During his appointment in Maitland he was associated with Professor Sir Edgeworth David and his work on the Greta coal seam.