Accumulate and educate with an investment bond
MB+M Wealth Creation Team Update : Accumulate and educate with an investment bond
The cost of raising children has increased significantly over recent years with an average high income family’s estimated spending for two children being almost $1.1m from birth until they finish their education. The largest single contributor to these costs was the cost of education, at around 21% of total child raising costs. Both primary and secondary education costs increased enormously, with preschool and primary education almost doubling in cost, and secondary education more than doubling in cost over the previous five years.
We all know the rising cost of education is expected to continue. According to the Australian Bureau of Statistics’ Household Expenditure Survey, it found that education costs rose by 44% in the six years to 2016.ª
Recent studies have shown that 45% of Australian families will educate their children in the private school system. Throw in incidentals like excursions, books, laptops and uniforms and there’s no doubt about it – giving a child a good education can be expensive.
How do you make sure you have the choice of education options when the time comes? The key is to have a plan, start early and consider an investment bond for a tax effective, flexible investment solution. While it may seem crazy to start planning for a child’s education in their infant years, investing in an education is a long-term investment that needs a long-term savings plan. By starting early you’ll have more money available when you need it.
How an investment bond can help
Investment bonds are a tax effective way to save for the cost of education as they are a tax paid investment. This means the tax paid on investment earnings is paid by us (Generation Life) at a tax rate up to 30%. Investors don’t need to declare any annual income from their bond in their annual tax returns.
Benefits of a regular savings plan
Investment bonds are flexible investments and you can choose to make regular contributions from as little as $100 per month. Setting up a direct debit is a way to grow your investment without even having to think about it. Add compound interest into the mix and you’ll be packing them off to the best school before you know it.
Your friend: compound interest
End results after 18 years
- Initial $10,000 investment has earned $74,427 (end value of $189,027)
- Initial $50,000 investment has earned $134,263 (end value of $277,863)
Investment in a Gen Life – ChildBuilder Investment Bond
- Regular savings (per week) $100
- Investment period 18 years
- Growth investment return p.a. 7.50%
ª Australian Bureau of Statistics 6530.0 – Household Expenditure Survey, Australia: Summary of Results, 2015-16.
If you have questions you would like answered, or need help with estate planning or investing for your children’s education, please reach out to the Wealth Creation Team on 03 5821 9177 and speak with one of our leading certified advisers.
MB+M/OzPlan Wealth Creation Team
This publication has been compiled by OzPlan Financial Services, ABN 35 005 391 202 AFSL 221235 and is current as at time of preparation, January 2021.
Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information and any advice in this publication do not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up-to-date or fit for any purpose. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication.
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