According to the National Centre for Social and Economic Modelling’s 2013 Income and Health Report, the typical middle-class Australian family will spend approximately $812,000 raising a child from birth to adulthood.
This figure is 50% higher today than it was in 2007. Interestingly, while the cost of raising a child has soared 50% since 2007, data from the Australian Bureau of Statistics shows household incomes have only increased by 25%.
During your child’s early years, the biggest costs are likely to be childcare and schooling, but there are a number of products that can lessen the financial burden.
Some of the more common financial products that parents or parents-to-be can use in order to prepare for their children include:
Investment bonds are a tax-effective means to save for your child’s education. They are opened under your child’s name and can be started with as little as $1000. If the savings you store away in the investment bond are used for educational purposes, you can receive significant tax concessions. However, you will need to hold it for more than 10 years to have your personal tax obligations reduced to zero.
Offset home loan accounts
If you have a mortgage, an offset account or redraw facility can act as great savings tool. The money you plug away into your offset account or redraw facility can be used at a later date to pay for schooling or childcare (depending on your needs). Better yet, by using either product, you have the added benefit of paying off your home loan faster as well. Your financial adviser can talk you through which option might be best for you and how you can ensure your offset or redraw facility is used to its fullest potential.
Whether you’re already a parent or are planning to have children in the future, it's worth speaking to your FinChocie financial adviser to see how you can be financially prepared for all stages of your child’s life.