Family savings handed down for grandkids’ futures
GRANDPARENTS and parents worried about children’s financial futures are stashing money away for them, but often not in the best place.
A study by Generation Life found that 93 per cent of grandparents and 97 per cent of parents are concerned as high property prices and education costs threaten the next generation’s financial security.
It found 47 per cent of parents and 15 per cent of grandparents are saving to help out, and a majority use bank accounts paying low interest.
Generation Life joint CEO Catherine van der Veen said there had been a structural shift over the past 20 years and people were no longer confident that children were financially able to “stand on their own two feet” when they finished high school.
“More than ever, the next generations are going to need help to pay for their education and to get into a house,” Ms van der Veen said. She said the keys to helping out were:
• STARTING early to harness the benefits of compounding.
• TALKING to children to educate them financially – “don’t leave it to the banks”.
• ENSURING that the savings kept up with the rising cost of living.
One strategy is through investment bonds – long-term funds that spread money across a range of assets. Tax is paid within the bond at 30 per cent rather than at the owner’s marginal tax rate. “Investment bonds used to be popular long-term savings vehicles until superannuation was introduced,” Ms van der Veen said.
Kate Reid has five investment bonds, each worth $50,000, for her four grandchildren, and said they had “done well”.
Mrs Reid said grandparents were worried about the effect of volatile house prices and low interest rates on younger generations. “A lot of my friends are supporting their children, not only with financial help … but with childcare as well so both parents can work,” she said.
Wealth on Track principal Steve Greatrex said it was important that parents and grandparents looked after their own finances first, and let younger generations “grow their own financial wings”.
“People are giving too much too soon, and then living a lot longer than expected and making themselves poorer,” he said.