Finding funds for kids
A RANGE OF OPTIONS CAN HELP PARENTS SAVE FOR THE FUTURE
Calculating the cost of raising a child from nappies to P-plates is more critical than ever in this pandemic era. At least 70 per cent of surveyed families were concerned about their future financial situation, according to a recent report from the Australian Institute of Family Studies (AIFS).
Aussie mum and founder of Flourix Wealth, Rachel O’Connor, has shared with Kidspot and SMARTdaily some vital tips about how to financially prepare for your child’s future – all the way from night feeds to house deeds, as well as the best advice on involving your kids in those decisions.
It was a typical moment at the checkout which illustrated to O’Connor how important it is to educate kids and their parents about money.
The argument started as she and her four-year-old son Billy approached the cashier at their local Target. Like many young children Billy wanted a toy, even though his mum told him no, and refused to give up the fight.
“He was insisting that I just needed to tap my phone, that it just needed to be tapped and that it didn’t matter,” O’Connor says.
“He just couldn’t understand that there wasn’t any money in my phone to tap.”
The AIFS study revealed lowpaid families will end up spending at least $159,000 per child by the time they turn 18.
For unemployed families, this amount is slightly less at $131,000.
So how do you save for your child’s future?
WHY ARE YOU SAVING
The first thing you need to consider is the purpose of the saving or investment, O’Connor says.
Decide if you want to involve your child in the process or simply “set aside money for a specific purpose”, as “what you’re looking for in both those situations will be different”.
In terms of the options available – the simplest is a good oldfashioned piggy bank, which can help kids save while also learning about the physical reality of money.
You could also open a savings account for your child at the bank and download the app on your phone. O’Connor says this is a great way “to get kids to watch their money grow”.
“When it comes to tax, the good thing is most children won’t pay tax on their cash savings,” she says.
WHAT IS THE BEST INVESTMENT
The next three options are a little more complicated. O’Connor suggests one option is investing in shares – but warns parents to be aware of the fact that they will likely have to open the portfolio in their own name.
“Just remember that whoever’s name the account is in, that’s who pays the tax,” she cautions.
She also suggests considering opening an investment bond for your child – which combines a life insurance policy with an investment portfolio – and can be great for saving for education.
Finally, O’Connor suggests using your mortgage offset account – which saves money by reducing the interest you pay on your mortgage. “You don’t pay tax on this and the money is accessible when you need it as it’s held in cash,” she says.
*The information contained within this story, unless specified otherwise, is of a general nature and does not take into effect your personal goals, objectives and circumstances. You should not act on this information without seeking personal financial advice from a licensed financial adviser