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Include Education Bonds in your saving plan for your child.

The numbers are in. The cost of education in Australia is rising. And it’s not limited to independent schools. Catholic and public school parents are putting their hands in their pockets for more and more costs each year too.

So, how do you save money for your child’s education?

With the rising costs of education, it makes sense to invest in your children’s education early. Planning is key. Setting up a dedicated education fund like EdSaver may help you avoid having to dip into your other savings to pay for your child's education.

Planning ahead brings other benefits too like giving you the financial freedom to choose the type of education you want for your children.

Let’s explore some of the common ways to set up an education fund. All offer different levels of risk, reward and tax benefits.

Best saving plan for your child’s education

The best savings plan for your child is the one that starts early. Getting the education you want for your children is going to cost money. To make sure you have the finances you need, it helps to set goals and plan for how you’ll achieve them. And the sooner you do this, the more achievable it will be.

There are investment options for your child’s education that will give you more bang for buck. But not all investment options are created equal, so you need to consider how to best invest so you can successfully achieve your goals.

Some options are super conservative (think regular saving accounts) giving you little risk and little growth, while others are more volatile with higher risk but the potential to generate more money.

The key is to balance risk and return. As well as finding the option that best suits your own personal situation.

Consider some of the following options.

Bank or savings accounts
You save money regularly to accumulate the money you need at a later date. Unfortunately though the super-low interest rates of today make this option a fairly hard slog. Your money won't be working particularly hard for you and growth is minimal.

Another similar approach is to pay extra on your home loan or linked offset account. You then have the flexibility to access the money when you need it.

Both these options can be tricky, as you’ll need to be disciplined to not use the extra money you’re contributing for other competing priorities instead of the education that it was intended for. Plus you could potentially earn higher returns on your cash by putting the money in other investments

Investment Bonds
Investment Bonds are typically flexible, tax-effective investment products to help you achieve your long term financial goals.

An Investment Bond acts like a combination of a life insurance policy and a managed fund. The amount you invest is pooled with others and invested in a range of asset classes. Often with a choice of investment options to be selected based on your risk profile, time horizon and financial objectives.

Shares
Dabbling in the share market has provided some great results for some wanting to grow their money for education purposes. And not so great results for others.

It’s generally fairly time consuming as you’ll need to monitor your investments and make decisions about when to buy and sell. It’s not for the faint-hearted and almost all share investments need to be considered over the long term to see optimum results.

ETFs
An ETF is a managed fund that you can buy or sell on an exchange, like the Australian Securities Exchange (ASX). In Australia, most ETFs are passive investments that don't try to outperform the market. The role of the fund manager is to track the value of:

  • an index, for example the ASX200 or S&P 500
  • a specific commodity, such as gold

The value of the ETF goes up or down with the index or asset they're tracking.

Although ETFs can be a valid option for education saving, they don’t offer you the benefit of being solely dedicated to education savings and investment.

Education Bonds
Education Bonds such as those from Futurity Investment Group are just as flexible as ETFs with some extra benefits thrown in. Education Bonds are used for saving and investing to tax-effectively grow your funds for education expenses. They deliver the same benefits as other traditional investments and saving options, with the bonus of additional unique features. These features help make them flexible, tax effective and tailored for education expenses. You’re able to keep adding to your investment through ongoing contributions as long as they meet the 125 per cent rule. Your annual contributions are limited to no more than 125 per cent of the previous year’s investment. If you keep to this rule you’ll preserve the fund’s qualification for the Investment Bond 10-Year Advantage.

Benefits of an Education Bond from Futurity Investment Group include:

  1. Tax savings - money paid into the Education Bond doesn’t attract any tax and can be accessed at any time.
  2. Minimal or zero fees - It can cost nothing to grow your investment. And you might not be up for any fees to set up or add to the education bond.
  3. Set and forget - You invest the money and the bond issuer takes care of the rest. Other investment options like EFTs require you to make decisions about what to invest in and when.
  4. Reduced risk - Education Bonds are investment-linked life insurance contracts between you and the issuer. Only friendly society-based life companies can issue them. Plus they carry strong legal protections and security measures under the Life Act and stringent APRA prudential supervision.

More about Education Bonds and tax benefits

 

Futurity Investment Group pays tax on their education bond’s ongoing investment earnings at a tax rate of up to 30 per cent. When you make a withdrawal to fund education, you’ll enjoy a refund of the tax already paid.

Futurity Investment Group Education Bonds include planning estate features. That means an Education Bond is an excellent way to ensure the money you set aside to invest in the educational future of your children or grandchildren is used for the intended purpose.

An added bonus is any withdrawals sourced from the capital component of your Education Bond are tax free. This includes any money you have already paid tax on or any capital amounts you’ve contributed.

Find the best saving policy for your child and you

How to save money for your child's education is important because it’s one of the biggest investments you’re likely to make. So finding the best saving policy for your child and you is essential.

Futurity Investment Group is solely dedicated to providing education savings and investments. That means you’ll be dealing with experts in their field.

Futurity’s Education Bonds are designed to help you save and accumulate the money you need for education expenses. Plus they boast some very attractive tax benefits.

Get in touch with Futurity to find out the best options available to you. Solutions that will help you save money for your child’s education without it being overwhelming or a burden to the rest of your life.