03 Dec Financial Planning: Investing For Your Children’s Education
Quality education is one of the best gifts you can give your children. But these days it doesn’t always come cheap — especially if you have more than one child. That’s why it pays to plan ahead. Considering a financial planner before big life changes is a notable way to make sure you are ahead of the game.
Costs of Education
Everyone knows that private school education can be expensive — with the Australian Scholarships Group estimating that putting a child through private school, from early childcare to Year 12, could cost as much as $400,000, particularly within Geelong.
But even with public school education, you could still pay close to $60,000 per child over their school years, for things like uniforms, learning necessities and extracurricular activities.
So whether you plan to go public or private, or even chip in for university education, creating a financial plan in advance can help you be better prepared, so you can afford to give your kids the best start in life.
Here are three easy tips to help you save for your children’s education, without sacrificing your lifestyle.
1. Get in the saving habit
Putting away a little bit of money each time you get paid can result in a surprisingly large investment over time. If you schedule an automatic transfer to come directly out of your pay, you probably won’t even miss the extra funds.
A financial planner can help you get into the habit of saving regularly throughout your children’s school years. With a financial plan, you can make it a whole lot easier to manage school fees and related expenses. You could also choose to invest these regular payments in a managed fund rather than a regular savings account and potentially grow your savings even faster.
For example, say you start with an initial managed fund investment of $1,000 when your child is born, and continue investing $50 a week for the next 12 years. You could save the equivalent of over $42,000 in today’s money by the time your child starts high school — which could make a big difference to your family’s finances.
2. Take advantage of dollar-cost averaging
Dollar-cost averaging is a financial strategy where you invest over a period of time instead of all at once. In a managed fund, you essentially buy shares or ‘units’ in the fund with your ongoing payments. The more units you own, the more interest you can earn.
By regularly investing in a managed fund over time, you’ll automatically get the benefits of ‘dollar-cost-averaging’. Here’s how it works.
Within your financial plan, you will set an amount to invest within your managed fund. When the price to buy units in your managed fund is low, you’ll be able to buy more with your regular investment amount. At times when the price moves higher, your regular investment will purchase fewer units.
Dollar-cost averaging means that the average cost you pay per unit, over time, is likely to work out lower than if you invested a lump sum at once at the top of the market,potentially giving you more for your money.
3. Reinvest your returns
If you keep up your regular payments to a managed fund and avoid withdrawing the dividends, you can reinvest your returns and save even more in the long run. What’s most rewarding about this financial strategy is when the returns you’re reinvesting each month exceed your monthly outlay you will have more funds to provide to your child’s education.
Why consider a financial planner?
Saving for your children’s education is a long-term investment, so considering a financial planner can significantly help you with your investment strategy. At Master Your Money Now our office may be in Geelong but we can help you with your financial strategy anywhere in Australia. We want to help you build your investment portfolio so you can provide your child with a quality education.
If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30-minute strategy session.
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Disclaimer: This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.
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