Financial planning for your family
Financial Planning for your Family
Raising a family is a marathon effort, as costly as it is rewarding. But financial planning for your family is easier than it sounds, because you know what the key milestones will be. Here’s how to plan effectively for each one: from the birth of your first, to your youngest leaving home – and beyond.
Making a will
First things first: as soon as your first child is born, you need to update your will to protect them in the event of your death. Continue to update your will for each child that you have, to ensure there are no complications.
Children's savings
When it comes to saving, children have one very important advantage on their side: time. Take out savings or investment account for your child as soon as possible, paying into it regularly if you can. Compound interest over the years can build it into a substantial nest egg by the time they leave school.
There are various investment accounts available. Talk to your Newcastle Financial Planner about your different options.
Cash is often seen as safer, but can be eroded by tax & inflation if interest rates are low. Shares & Managed Funds can deliver greater long-term growth, especially if you plan to leave the money untouched for a long time.
Others consider using an offset account dedicated to their children. This will also benefit the family by reducing the ongoing interest & mortgage repayments.
Some parents look even further ahead, and set up a superannuation fund for their children. This unusual approach can deliver some impressive results – for the very patient!
Saving for education
As soon as your child is born, you know they will be starting secondary school in 12 years’ time. A fixed milestone like that is the investor’s best friend, because it gives you a definite target to work towards. Remember that even state-funded education can be very costly, with expenses such as uniforms and school trips to cover, so it makes sense to start building up an ‘Education Fund’ as early as you can.
Similarly, you should look at setting up investment to help fund their university or trade education. This is considerably more costly – but you have much more time, 18 years or more, so you may not need to pay in as much as you think.
Whether you’re saving for school, uni or both, your Newcastle Financial Adviser can recommend a portfolio of investments designed to deliver growth inside each fixed timeframe, so the money can achieve maximum growth and is ready for exactly when you need it.
Growing families - upsize or extend?
One of the big ‘hidden’ costs of having children may be the need for more space. The more kids you have, the more rooms you need, especially if you have both boys and girls.
Long-term planning is crucial. Think about how many children you hope to have – you don’t want to move every time. Location is also key; where once you might have cared about being close to good nightlife (they were the days), now you care about school catchment areas, sporting teams, dance studios, parks & playgrounds. Ideally you are looking for your home for the next ten years at least, so talk to your Newcastle Financial Advisor (& their business partners) to see how much you can safely borrow.
If you love your current home but need more space, extending may be an option for some houses. Refinancing can free up the funds you need for this. Sometimes your Newcastle Financial Planner (& their business partners) can source a deal that actually lowers your repayments or keeps them the same, so you can add space and value to your home without any immediate extra cost.
Financing education
If you’ve invested for your child’s education then monitor this portfolio carefully in the last few years, and perhaps move it into safer more defensive assets (such as cash). Your Newcastle Financial Adviser can help you throughout this time.
If your child also needs a HECS, this only needs to be repaid once they reach a certain level of earnings. Unusually, paying off these loans early is not usually recommended, as their interest rates are often below inflation/personal loans/credit cards, so a lump sum may be better used in savings or investments.
If you have the funds, one way to help your child may be to buy their student accommodation. We had a client from Newcastle, that when their son started high school, they purchased a unit close to Sydney University. They are renting out the property until their son starts university. During university their son can rent out the other rooms to pay the mortgage and save significantly on their own living costs. The property itself may also become a useful investment. Your Newcastle Financial Adviser (& business partners) can help you see if this could work for your particular situation.
Helping your children buy homes
One of the last big steps of being a parent is seeing your child set up home for themselves. This is a lot more challenging than it used to be, so most young people are likely to need parental help, with the average home in Adamstown now costing upwards of $800,000.
There are a number of ways in which you can help your child get a mortgage, which do not involve handing over large lump sums. You might even be able to help them onto the housing ladder while they’re still at university and so squeeze extra value from the money spent on education costs.
Talk to our Newcastle Financial Planners (& their business partners) about the best way to help your child find a home of their own, for your specific circumstances.
Sorting out family inheritance
You should have kept your will updated regularly to ensure your family is taken care of. As you enter later life, start to think in more detail about inheritance planning and whether or not your family will be exposed to taxes in the event of your death (super, insurance or capital gains).
This kind of planning is ongoing, perhaps lasting a decade or more, so talk to your Newcastle Financial Planner when you still have many healthy years ahead of you. With advice and forethought you can manage your estate to minimise any future tax liability.
When a family member is injured, ill or passes.
Our Newcastle Financial Planners recommend you consider personal insurance to support your family in the event of injury, illness or death.
Many look to cover their mortgage, living expenses & child education for several years, however depending on your individual circumstances, these numbers may not be enough.
If you live in a home, whether you are renting or repaying a mortgage & you can’t rely on wealthy parents to take care of your kids if something happens to you &/or your spouse, you should consider a significant amount of insurance. Even if you are not providing a lot of income or are planning to stay at home with your baby, you should still be insured. You will have to cover any lost in income & also cover the cost of a carer for your kids (or the other parents income should they become the carer).
While life insurance is important, you may also need to insure against the possibility of an injury or illness that could keep you from working & earning an income for your family. Our Newcastle Financial Advisers recommend you consider a comprehensive insurance plan to protect your family’s future, by including Life insurance, Total Permanent Disablement, Income Protection & Trauma cover.
NEWCASTLE FINANCIAL PLANNING
Supporting with all of your financial advice across Newcastle, the Hunter, Central Coast & Sydney.
Visit our Newcastle Financial Planners at Level 1/142 Union St, The Junction NSW 2291.
Our Newcastle financial planners also have offices in Sydney and help clients across the local areas including Newcastle Financial Planning(Merewether financial planning, The Junction financial planning, The Hill financial planning, Bar Beach financial planning, Newcastle West financial planning, Hamilton financial planning, Adamstown financial planning, Redhead financial planning, Whitebridge financial planning, Kotara financial planning, New Lambton financial planning, Mayfield financial planning), Maitland Financial Planning (Morpeth financial planning, Lorn financial planning, Rutherford financial planning, Aberglasslyn financial planning, Metford financial planning, Beresfied financial planning), The bay (Medowie financial planning, Fern Bay financial planning, Fullerton Cove financial planning, Anna Bay financial planning, Nelson Bay financial planning, Shoal Bay financial planning, Tea Gardens financial planning, Hawks Nest financial planning), Lake Macquarie Financial Planning (Cardiff NSW financial planning, Glendale financial planning, Speers Point financial planning, Fennell Bay financial planning, Bolton Point financial planning, Coal Point financial planning, Toronto financial planning, Valentine financial planning, Belmont financial planning, Eleebana financial planning, Warners Bay financial planning, Caves Beach financial planning), Hunter Valley Financial Planning (Muswellbrook financial planning, Scone financial planning, Pokolbin financial planning, Cessnock financial planning, Singleton financial planning, Broke financial planning, Rothbury financial planning), Central Coast Financial Planning (The Entrance financial planning, Bateau Bay financial planning, Berkeley Vale financial planning, Tuggerah financial planning, Wamberal financial planning, Terrigal financial planning, Erina financial planning, Avoca financial planning, Gosford financial planning, Woy Woy financial planning, Picketts Valley financial planning) & Sydney Financial Planning (Castle Hill Financial Planning, Rouse Hill Financial Planning, Dulwich Hill financial planning).
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