If you have kids, planning to have kids or its still a while away, have a plan that is kidsafe.
Education is something that’s close to the hearts of many parents. Most people are keen to make sure that children get the best possible education to prepare them for the future.
The reality is that the costs of education are constantly rising and it could easily be one of your family’s biggest expenses. This means that planning and budgeting are more important than ever.
If you’re starting to think about your child’s education and how you’re going to fund it, you may want to consider putting a regular savings plan in place. This means saving a sum of money on a regular basis and putting it into an account that earns interest. You’ll also be able to take advantage of compound interest, so you earn interest on any interest already earned.
For example, if you saved $10,000 at 5% interest per year, you’d think you would earn $2,500 in simple interest after five years, $500 for each year. This would give you a total of $12,500 after five years.
However if you invested $10,000 at 5%, and interest is paid monthly, you would actually earn $2,834 in compound interest after five years, giving you a total of $12,834. This is because every month the interest is added to your account and you'll earn interest on the interest.
Keep putting money aside and after a few years, you should have a significant amount put aside for a loved one’s education.
How do parents these days help their kids get onto the property market?
We love property in Australia. About 70% of us live in our own homes and only about half of all home owners are still paying off a mortgage.
Increasing house prices are good news for property owners and investors, but can present real challenges for first home buyers and those wanting to buy their first investment property. Speculation that property prices will continue to go up faster than wages means property can be a great way to build wealth but at the same time it becomes harder for younger people to get onto the property ladder. It’s a vicious cycle.
Every parent wants the best for their kids. While children may be living at home for longer these days, the family home can provide more than just a roof over their heads. Research from The Australian Housing and Urban Research Institute project suggests that the family home acts more or less like a savings account for many Australians.
By parents paying down the home loan, and particularly as the value of the home increases, an owner’s equity in the home builds. Parents can then release this equity by borrowing against their home and using the money to help their children.
If the parents can afford it, gifting a deposit can be a great start. A good deposit will reduce the amount the child needs to borrow and reduce the amount of interest paid over the life of their home loan.
If parents dont have a big pot of gold set aside for a rainy day, they can still help their children. Parents can use the equity in their home as a guarantor and help the child may qualify for a home loan.
If parents are able to make more of a commitment, they may want to sign as a joint borrower on the home loan. This option isn’t for everyone because although technically they own only half of the property, they still have full financial responsibility if the child doesn't pay their part.
If anyone you know are looking for the most effective way to assist their children, we recommend that they speak with their accountant or consult with a financial planner. We can assist with the funding side to make sure the solutions selected aligns with their goals and objectives.