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How to save for children?

Discussion in 'Living Room' started by aussieB, 3rd Jul, 2015.

  1. aussieB

    aussieB Well-Known Member

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    What would be some of the most productive ways for an average earning family to save up for a child's future ? The prime purpose of the fund being assisting higher education and a basicdeposit for investment/business (in a 70(edu)/30(deposit) ratio kinda thing).


    Cheers
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Your offset account generally. Minor children's unearned income over $416 pa can be taxed at 66%
     
  3. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Personally, I'd take the same basic approach as I am doing for my personal wealth creation: invest.

    I would assign a set proportion (or amount) of your household income and invest it. Depending on when you need to realise any gains, that could be property or a combination of assets. Assuming you've yet to have kids, or they're still young, you'll have plenty of time to let compounding do is thing.

    I would also be working on creating recurring income streams, whether direct investment, business or other.
     
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  4. Chilliblue

    Chilliblue Well-Known Member

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    Pretty much did what Steven suggested above.

    Investing a little often and letting compounding work its magic.

    The other thing we have done is to reinforce good financial practices so the kids have a good start.
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Have a look at interest deferred insurance bonds - no tax payable if withdrawn after 10 years (I assume that you are keeping your kids longer than that).
     
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  6. Beelzebub

    Beelzebub Well-Known Member

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    I don't understand why people choose to pay their children's university fees?

    For example, my father in law paid something like 20k for his daughters fees so she wouldn't have a HECS debt. I'd rather she had a HECS debt and she got that cash when we wanted to buy our first house.

    You only pay back HECS when you earn a certain income and it's very cheap credit. And of course your kids might not go to uni. Or they might decide to do a double major in philosophy and womens' studies and never earn enough to ever have to pay it back.

    My advice would be to make your kids pay for their own university education, except maybe books, and any savings you were planning on putting towards higher education put towards either a top tier private high school and or a deposit.

    Beelzebub
     
  7. geoffw

    geoffw Moderator Staff Member

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    Saving for children? What happens when you have enough to buy one?

    They have a name for people like that ...
     
  8. Beelzebub

    Beelzebub Well-Known Member

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    I guess a comma would help there. But if you don't want to use a comma I hear there are some great deals if you're willing to travel.
     
  9. freyja

    freyja Well-Known Member

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    You could look at it another way - your wife didn't have a HECS repayment so could put the extra cash towards a house deposit or extra repayments. It's all help!

    Luckily the proposal a few months back for HECS debt to attract rates around 6% didn't fly- having 3 kids heading to uni in the next decade ( give or take) that notion positively frightened me! It could always be revisited though...

    For my family, we have decided to send our kids to public schools (we have fabulous public options in our area) and use the money saved to get us in the best financial position possible. Then, when the time comes we will be better able support them with their goals.

    Instead of a savings account for each child, we place their 'savings' in our offset account and I keep track of their compounding accounts in an Excel doc.
     
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  10. Perp

    Perp Well-Known Member

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    I don't get the idea of saving for your kids' future in any way whatsoever. I went to public school, accumulated and paid off a HECS debt, bought my own first car, and saved a house deposit. My parents could have afforded to "help us out", but my Dad felt that allowing your kids to say "I achieved everything that I have" was the greatest gift a parent can give a child. I tend to agree.

    My parents would have been there for us if we'd really needed them (e.g. if we'd needed expensive cancer treatment or something), but we never have. Now that we're established - not wealthy, but standing on our own feet :) - they occasionally treat us a flight to see them, or a piece of furniture, or something like that. It's very much appreciated, and doesn't (significantly) compromise our sense that what we have, is the fruit of our own labours.
     
    Last edited: 4th Jul, 2015
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  11. Be Developer

    Be Developer Property Developer Business Member

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    @aussieB

    I guess it is cultural and personal preference..

    I would personally invest on their education. Buy a house or two with view of passing it to them as required.. (Needless to say setup structure correctly)

    $20k leveraged on investment today can have serious $$$$$ return when they are grown up!
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    All this is possible and can be improved by you allocated money to them, but using it to pay down your non deductible debt and then reborrowing to invest.
     
  13. Pistonbroke

    Pistonbroke Well-Known Member

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    We saved for children. They're in aisle 3 at the IGA.

    and is it prudent?
     
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  14. geoffw

    geoffw Moderator Staff Member

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    I hope you got the stamps.

    And the tantrums and the screams.
     
  15. Pistonbroke

    Pistonbroke Well-Known Member

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    Copped those all day today Geoff. It just snowballed.
     
  16. geoffw

    geoffw Moderator Staff Member

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    I hear you pb.

    And I hear the kids as wel.
     
  17. skater

    skater Capitalist Premium Member

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    I feel the same way. I think it's important that your kids learn to stand on their own two feet. Of course, you need to be there when they need you, but paying for everything for them can backfire & produce a child who just expects the bank of Mum & Dad to bail them out whenever times get hard, or they've chosen to waste their own income.
     
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  18. aussieB

    aussieB Well-Known Member

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    No HECS for overseas education. M.I.T and the likes.

    I thank the posters who stayed focused and replied to the actual question asked.

    Cheers,
     
  19. The Falcon

    The Falcon Well-Known Member

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    Yep this works, just watch the fees.

    Another alternative is buying stocks in the family discretionary trust account, if you like you can load on International stocks that don't pay dividends (compounders), or ASX dividend payers if you have other beneficiaries who can use the franking credits. When the kid comes of age you can distribute capital gains / dividends to them then.
     
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  20. Sashatheman

    Sashatheman Well-Known Member

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    Would you know if you can have two offset accounts? I am thinking having a second account with my commonwealth mortgage and put some money into it for my kids. I toyed with the idea of getting a high interest account, but its too much hassle. I would rather divert some of my earnings into an offset account and still help reduce my interest.