Preparing for Your Child’s Future Education
As parents, it’s important to plan ahead and invest early in your child’s education. The sooner you start, the more time you have to build your savings and take advantage of compound interest. Our authorized OzPlan Financial Services advisors can guide you through your options and help you make informed decisions.
Four-Step Approach to Planning for Your Child’s Education
- Have a plan
To ensure you have the choice of education options when the time comes, you need a solid plan in place. Consider starting with a monthly savings plan that suits your budget and goals.
- Start early
Investing in education may seem like a daunting task, but starting early can save you money in the long run. The earlier you start, the more money you’ll have available when you need it.
- Utilize compound interest
Compound interest is a powerful tool that can help you grow your savings faster. There are specific investments designed for education savings that enable regular contributions without brokerage fees, utilize compound interest, and provide additional tax benefits upon withdrawal each year.
- Be flexible
Family situations and budgets can change over time, so it’s important to have a flexible investment savings plan that can be adjusted as needed. Regularly reviewing your plan and making changes as necessary will help you stay on track.
CASE STUDY Noah
Noah’s parents want to send him to a Private or Catholic secondary college in the Goulburn Valley.
They have estimated the total school fees for his 6 years of secondary education starting in 2034. These figures do not include all the school extras like books, uniforms, and other extracurricular activities you may want your child to partake in.
Noah’s parents can begin to prepare now for his future by starting to save for his education. Remember, these calculations are only for Noah only! You will need to multiply the costs for every child you have.
Hot tip: start early!
With OzPlan’s guidance, Noah’s parents could enjoy a monthly savings plan that suits their budget and goals. There are specific investment’s designed for education savings that enable regular contributions without brokerage fees. They utilise compound interest and can provide additional tax benefits upon withdrawal each year.
By starting with as little as $1,000 and putting away spare cashflow each month, Noah’s parents could enjoy a long-term savings plan. They will know they are doing all they can for Noah’s future education.
Investment Accounts vs Savings Accounts
While setting up a savings account is a good start, you’ll likely see a greater return on your money using an investment account. With compound interest, you could turn $10 a day into $99,059 over 18 years based on an average annual return of 6%. In comparison, putting $10 a day into a bank savings account earning 3.2% after tax, would generate total earnings of $23,451 over 18 years (applicable interest rate of 4.9% before tax, Personal Tax Rate assumed 32.5% plus Medicare levy).
Remember, starting early is crucial for maximizing your savings.
Our OzPlan financial advisers are happy to have a chat about your situation and help you identify your goals. We can provide expert advice on how you can achieve them and prepare for your child’s education journey.
Give us a call at (03) 5831 1233, and let’s start planning for your child’s future today,
Published 24 January 2024.
The information provided in this article is general in nature only and does not constitute financial advice.