Doing It For The Kids

THE number one goal of most families is to provide a good education for their kids.

And the cost of sending your kids to most private schools almost requires a full-time wage. That’s why it’s important to start thinking about it well before they hit high school.

Not that the Government is helping matters. Last year in an effort to crack down on wealthy parents using their kids as a tax dodge, they reduced the amount of unearned income a kid can receive tax-free from $3,333 to $416 – after that they get whacked with a 66 per cent tax on income up to $1307 (and 45 per cent for every dollar thereafter).

So whatever you do, don’t save for their education in their own name.

Instead, think about opening up an education bond. These can effectively be opened in a child’s name, and the issuer pays the 30 per cent tax rate on the earnings within these bonds (so it doesn’t need to be put on your tax return) and after 10 years they’re free of capital gains tax.

The Australian Scholarships Group is the largest provider of education-based investments in this country, and in my humble opinion absolutely the worst piggy bank to be placing your savings.

Why?

Ridiculously high fees, expensive and irrelevant insurance policies, and an antiquated system that financially penalizes your kid if they choose not to go on to higher education – a trap that many well meaning parents don’t realize until it’s too late.

A better bet is looking an education bond by Lifeplan Funds management. There’s nothing like a monthly savings goal called ‘kids education’ to create an emotional connection — that’s one bill you will pay, no matter what. Remember though, in order to get the benefit for high school, you’ll need to start very early, and fund it well.

Tread Your Own Path!