What better investment can you make than in your child’s education?

Regardless of what school you send your child to, there will be costs involved. Yet many parents are simply unaware of – and unprepared for – the sheer scope of expenses involved, according to research from the Commonwealth Bank*. We all want to ensure that our children have the best start in life and a little early planning can help to ease the financial burden later on.

Set up a Child’s Advancement Policy

A Child’s Advancement Policy allows you to invest on behalf of a child without being exposed to the penalty taxes associated with investments held by minors. An adult investor can establish a Child’s Advancement Policy for a child less than 16 years of age. Only one child can be nominated under each Child’s Advancement Policy, with a single policy owner.

Under a Child’s Advancement Policy, the adult is the policy owner and the child is the life insured. The policy owner (adult) may nominate an age for the child (between 10 and 25 years of age) as the age when the Child’s Advancement Policy is to be transferred into the name of the life insured (child). This is known as the nominated besting age. Where no vesting age is nominated, the Child’s Advancement Policy will automatically transfer to the child, when the child reaches 25 years of age. No stamp duty is payable on the transfer.

Encourage grandparents and relatives to contribute

Education is one of the most important gifts you can give your child. Encourage your relatives to contribute the money they would otherwise spend on gifts into your education program for your child. Make an assessment as to whether your child really needs any more toys or would benefit more from greater education options.

Examine the security of your savings

When you’re putting the education of your children on the line, you need to question whether high-risk investment options are the right strategy. Low to medium risk investments may be a slower means to reaching your education savings goals,but they may be more secure and reliable.

Preparing and paying for a child’s education requires careful planning, and often, discipline and personal sacrifice. Your early involvement in planning your child’s education not only builds family cohesiveness, but also fosters a financially secure and
disciplined learning environment.

Saving for a child’s education is principally not any different to saving for any other long-term investment goal. And by taking a long-term view, you should choose an investment vehicle that will provide you with growth and flexibility.

However, for most of us, the economic realities of everyday life make it difficult to set aside enough money for long-term goals like a child’s education. The best way to save for a child’s future is to start early – ideally from the time a child is born.

* Source – 2006 ‘Saving for the Education of Children’ survey highlights 20 November 2006

Brett Abikhair has over 20 years experience in the finance industry. He has an Advanced Diploma of Financial Services (Financial Planning), Diploma of Mortgage Lending and specialist certification in Self Managed Superannuation Funds. Brett Abikhair and ABS Capital Pty Ltd trading as Real People Financial Services are Authorised Representatives of Consultum Financial Advisers Pty Ltd AFS Licence No 230323 ABN 65 006 373 995.