According to leading researchers, approximately how much does it cost to raise a child to 18?
THE ANSWER IS: C
Research from social researcher Mark McCrindle estimates that when you add the cost of tuition, sports and dance classes, together with the fact that the average child now stays at home until 24 – the real cost incurred by Aussie parents of raising their kids was $1,028,093.
Raising a tot to a teenager has become a million dollar endeavor.
Dancing and sport classes, iPads, and any number of extra curricular activities cost parents some serious pocket money.
Education takes the most chunk of change – school fees have increased 50 per cent since 2005. With one in three kids now going to (costly) private schools, and even public schools requiring parents to provide expensive books and learning materials – how can the average Aussie family prepare?
Apart from paying off the mortgage, providing for the children’s education is the number one goal of Australian families. Yet in these days of record personal debt and negative savings, few families are adequately prepared.
Rather than socking away money into a general savings account, which may be raided some time in the future, families need to set up a specific education account (but not an ASG one!)
The best way to do this is via an old-style investment bond (available through IOOF, and ING), which can be started with as little as $1000, bought in a child’s name, and provides an incentive to regularly invest small amounts into Australian and international shares. The kicker is that if the proceeds are used for educational purposes they attract significant tax concessions, and are capital gains-free if they are held for longer than 10 years.
Albert Einstein once called compound interest the eighth wonder of the world. Let’s see what the old coot was talking about…
Let’s say the day junior pops into the world you put a thousand bucks into an investment bond, and get the doting grandparents to chip in $100 a month.
By the time Junior’s gets to his 18th birthday you will have saved about $22,000 – yet through the miracle of compound interest that will have grown to over $50,000!
Money Quote from a wise old bloke: “A very rich person should leave his kids enough to do anything but not enough to do nothing”. Warren Buffett (one of the richest men in the world who famously made his kids pay their own way in life).
Tread Your Own Path!