We have written previously on rising education costs in Australia. It’s a topic that’s increasingly relevant for our clients given the growing trend for grandparents to fund their grandchildren’s schooling. If you’re paying for your grandchildren’s education, or plan to do so when you retire here are two ways to make it much more affordable.
1. Think ahead
Starting an education fund for your grandchildren well before they start school means paying fees won’t interrupt your daily cash flow and you can enjoy capital growth on money invested. A number of education-specific savings options exist and we can show you how they compare and which is the most appropriate in your circumstances. The options include education funding accounts; insurance bonds; regular savings plans; and for investors who have the right appetite for risk, borrowing to invest.
2. Protect your savings by asking your adult children to protect theirs
Levels of underinsurance in Australia are alarming. Most people with dependent children – and this may include your own adult children – are not adequately protected should they need to make a personal insurance claim in the event of accident, illness or death. As a grandparent, have you thought about how the underinsurance of your family may impact you, as well as them? Naturally, you would do everything you could to help if your adult child had an unexpected accident or became ill. But we all know that raising a family costs a lot of money. A 2013 AMP / Natsem (National Centre for Economic Modelling) report showed that it costs about $452,000 in 2013 dollars to raise two children from birth to age 20. If something were to happen to your adult child whereby they could no longer earn an income, can you imagine the impact this could have on your grandchildren’s standard of living? And unfortunately as you approach retirement, it may not always be possible for you to provide the financial assistance they need.
This is why an effective way to help your children financially is to make sure they’re adequately protected against accident, illness and death. Life cover can provide financial security for your child’s family in the event of their death, with a lump sum payment or instalments. Trauma protection could provide a lump sum or instalments to help maintain the family’s lifestyle if your child was diagnosed with a critical illness. Total and permanent disablement (TPD) cover could provide a tax-free lump sum or instalments if your child was unable to work due to illness or injury. And income protection insurance policies may cover up to 75% of their regular annual pre-tax income if they are unable to work due to illness, accident or injury.
Please contact us for suggestions on how you might approach this conversation with your adult children to encourage them to consider adequate cover to protect their family in the event of death, illness, accident or injury.
Pacesetter Financial Services and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information (including taxation) is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Pacesetter Financial Services strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.