Be financially ready for your child

With the New Year now upon us, the start of a new school term is just around the corner.


Whether you have kids or are planning on having them in the future, raising a child can be very expensive.

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%.

In this three-part series, we’ll look at the costs associated with raising a child and how you can be adequately prepared.

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.

As your financial adviser, I can help you identify which financial products may work best for your situation. Some of the more common financial products that parents or parents-to-be can use in order to prepare for their children include:

1
Investment bonds

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.

2
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 child care (depending on your needs). Better yet, by using either product, you have the added benefit of paying off your home loan faster as well. As your adviser, I 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.

Regardless if you’re already a parent, or you are planning to have children in the future, it may be worth speaking to us today to see how you can be financially prepared for all stages of your child’s life.

Contact us and see if investment bonds and offset home loan accounts might be a good fit with your investment strategy.

Talk to your local financial adviser today

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