Financial Planning
How will I save for my children's education?
The importance of saving for education is trumpeted loud and long these days as university fees spiral upwards and private schooling becomes a must-have for upwardly mobile families.
Given you're committed to helping your children out and can put some money aside regularly, what are your options for education savings?
The first point to note is that saving for your children's education is not in principle different from saving for any other goal. It may, however, have a longer time frame, which means you could consider growth investments shares or managed funds. Through a regular saving plan, dollar cost averaging (buying more shares or units when market prices are down, and fewer when they're up) should smooth out the volatility of the sharemarket over the long term.
Given the time scale, the most effective strategy may be to combine dollar cost averaging with a moderate gearing program - borrowing money to invest.
Tax is an issue that concerns many people considering education savings programs (or any investment for that matter). Existing education savings products have generally been structured around tax-friendly insurance style bonds. However this doesn't mean they are the most tax-efficient investment for your circumstances. In fact, you may be paying more tax than necessary by investing in these products.
So, no doubt you will agree there are many things that need to be considered, including:
- in whose name should the funds be invested: the child's, parents', grandparents' ?
- what is the most efficient tax structure?
- should you clear your home loan before you establish a savings program?
The concept of saving now for your children's education is terrific and essential. However, you can set up a savings program in several ways. Specific education savings plans are not the only solution!
Other options may include an insurance or friendly society bond, or a "child advancement bond", which is set up by a parent or grandparent to be paid out to a child when they reach a nominated age.
This is where objective financial advice is essential and why you should seek the advice of a qualified financial planner. They can guide you through the maze of alternatives available. DO NOT be lured into signing up for a long term investment based on emotion and without appropriate financial advice.
Call Police Credit Union on 131 PCU (131 728) to arrange a complimentary, obligation-free meeting with a Bridges Financial Planner, who can help you plan to achieve your lifestyle goals in the years ahead.
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