How do/will you prepare for your kids education?

I would like to know how people prepare for their kids' education as we all know the cost of education is getting higher and higher nowadays. Any one has experience on those education funds? Personally, I am single but have started a managed fund for this purpose. For those who are parents, would you like to share your experience? For those who are not parents at the moment, what do you think you will do? Thanks.

Child could help too, but would have to be hard working and probably have capacity to excel.
Having top marks can lead to some kind of grant or other assistance.

Not popular view, but one can work and study part-time. Being able to do 1 subject during summer session too, study can be easily reduced by 6 months, or some sessions can be little 1 subject lighter.

Also nobody said that study has to be completed exactly on time, there is minimum requirement and it can be extended too, if you ask nicely.

Should study be in some way work related, one could get some assistance from work too, like flexible hours, paid/unpaid days off for study related matters.

If you're going to invest money for this purpose them make sure that you can still get the money out if it isn't required for education. My understanding is that some of these "education plans" lock you in and if the money isn't spent on education then you don't get it at all. I recall this being reported on one of the current affairs programs some time ago.

You, as a parent, might think your son is going to be a lawyer and your daughter a teacher. But he might decide that being a plumber is more practical and she might decide that with her good looks there's more money being a model. And of course it's their decision to make.

In that case neither will be going to university so you want to make sure that you aren't locked in to spending the money on this purpose if it turns out to not be needed.

How would it be to start a share portfolio purely for this purpose?
You'd need to consider the tax implications if it was in the children's names.
If you participated in DRP's it should accumulate a substantial amount if you are starting it now and haven't even created the first child.

If you did this, and the kids - as Smurf has pointed out - don't want a university education, they would benefit anyway with a good start towards a home or whatever.

Good for you thinking about at such an early stage. Lucky kids.

Cheers
Julia

For three generations my family have been in similar professions and active in the stockmarket and/or the property arena all at varying degrees and ages. The point here is the close associations, exposure to these areas, lifestyle and positve attitude you project are observed by your children and are likely to set the standard. Everyone especially children need to know that self esteem, focus, discipline, excellence and above all perserverance will usually lead to positive results whatever they decide to do. If you are modelling these behaviours you are all ready providing for and educating your children very, very well indeed. Chances are they'll get a part time job or create an income to help themselves in their vocation because they're capable and want to.

Cheers
Happytrader

happytrader said:

For three generations my family have been in similar professions and active in the stockmarket and/or the property arena all at varying degrees and ages. The point here is the close associations, exposure to these areas, lifestyle and positve attitude you project are observed by your children and are likely to set the standard. Everyone especially children need to know that self esteem, focus, discipline, excellence and above all perserverance will usually lead to positive results whatever they decide to do. If you are modelling these behaviours you are all ready providing for and educating your children very, very well indeed. Chances are they'll get a part time job or create an income to help themselves in their vocation because they're capable and want to.

Cheers
Happytrader

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Great post, Happytrader. You are so right.

Cheers
Julia

Thanks for all your suggestion. The reason why I try to think ahead a bit is I have seen a few colleagues who have kids now are a bit struggling. They always complain they cannot save money because they have kids especially those send their kids to private schools. I certainly not 100% agree there is no way to save any money. To give myself a bit more room to breathe in the future, I believe this is the right thing to do.

Happytrader - You are right. Parents can have major influence on how their kids deal with money in their future. Donald Trump mentioned in his book "How to get rich" about his kids saw what he did like he learnt from his parents.

Julia & Smurf1976 - For this purpose, I have started a shares managed fund which means it is not tied to any restriction even though I have the intention on how to use it in the future. From my understanding, education funds do have the tax benefits but the money can only used for education only. However, it is not restricted to university studies only.

Happy - I like your idea on the study grant. Everyone wants to have a very smart kid but we all know the reality. Working part time while studying in university is very common nowadays due to the high HECS.

from my course:

"Since children earn no income (assuming they are below working age) but still have the same tax rules as you and I, why not exploit them? (the tax rules, not the kids ) What if you buy a stock in your childs name? The child receives dividends (or you do as guardian) and franking credits. Since the child has no other tax liability, they will receive a 100% tax refund for the franking credits. If you currently pay the top tax rate and have shares and kids, work out how much you will save. If you have multiple kids you can save a fortune! I did some sums:

If you took $500 and opened a share account for your child at birth, by age 16 that account would be worth $4,150 (assuming div yield 5%, reinvestment, div growth 7% p.a). Compare this with a savings account with $1,091 at year 16. $4,150 sounds like a nice little car, especially if it only cost you $500.

In the U.S, parents start saving for their childs education at birth. Considering the average Australian University student gets their degree with a $20,000 HECS debt, let’s see if there is an alternative. Most likely the child will not begin work at age 16 since they are at school. They will not work until they complete their degree at age 21. If we invest $1,240 at birth, by their 21st their account contains $20,000. Bye bye HECS debt.

If you currently receive $10,000 in dividends and pay 47% tax, you would need to pay an extra $2429 in tax on top of the franking credits. If however the shares were sold and bought in a childs name, there would be a tax refund of $3,685. This is an overall saving of $6,114. This strategy improves the after tax cashflow by a staggering 81%."

What if that 'baby bonus' was invested would have been a much better use than people going out and spending it on stupid items

Another fantastic useless idea from the government, they should have placed the funds into trust on the childs name not given it to reckless parents who would have spent it

As for the education, I know CBA do offer a product called the Education Savings plan, might be worth investigating.
The other banks may offer something similar

DISCLOSURE
I work for CBA

Wouldn't touch the ESP with a very long barge pole (so long infact, the pole may well come into contact with MUL long before it gets to a ESP). I won't go into the reasons here, but go find yourself a planner and ask about their experiences with them.

If you want to save effectively for your child, I would be focusing on building my own personal wealth by whatever means you already do. I don't see the point in segregating money to place in a purpose built plan with rather average returns and a shocking history.

Even for someone with very little financial understanding and/or assets there are potentially better ways. $1000 and the cost of a flat white each day will see you into managed funds with the CBA (and others I'm sure) and you'll find there are significant advantages in that over the ESP.

doctorj said:

.... (so long infact, the pole may well come into contact with MUL long before it gets to a ESP).

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HAHAHAHAHAH

That gave me a good laugh Doc

Cheers

Something to think about when steering a child into a career path. A mate earns $1800/wk clear doing a trade. Another earns $600 with their uni degree and mortar board. I run my own business..... . Now which is the better option?

I will be sending my kids to private school but they wont be swallowing that crap teachers pedal that you have to go to uni to get ahead. From where I sit, uni isnt all that great. Making money vs making a difference to the world would be a better argument.

PS- I drew my 'college fund' and bought 'Australian Hospital Care' a few years back. FOURBANGER!

bvbfan said:

What if that 'baby bonus' was invested would have been a much better use than people going out and spending it on stupid items

Another fantastic useless idea from the government, they should have placed the funds into trust on the childs name not given it to reckless parents who would have spent it

As for the education, I know CBA do offer a product called the Education Savings plan, might be worth investigating.
The other banks may offer something similar

DISCLOSURE
I work for CBA

Click to expand...

Another two Education Savings Plan that I know are

• Australian Unity Education Savings Plans
• Australian Scholarships Group

doctorj said:

Wouldn't touch the ESP with a very long barge pole (so long infact, the pole may well come into contact with MUL long before it gets to a ESP). I won't go into the reasons here, but go find yourself a planner and ask about their experiences with them.

If you want to save effectively for your child, I would be focusing on building my own personal wealth by whatever means you already do. I don't see the point in segregating money to place in a purpose built plan with rather average returns and a shocking history.

Even for someone with very little financial understanding and/or assets there are potentially better ways. $1000 and the cost of a flat white each day will see you into managed funds with the CBA (and others I'm sure) and you'll find there are significant advantages in that over the ESP.

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doctorj, I agree that it is a good strategy on focusing on building own personal wealth. I started a normal Colonial First State managed fund with saving plan. So far the return is quite good and this gives the flexibility on how to use the money (even though I have the intention for future kid education), too.

Milk Man said:

Something to think about when steering a child into a career path. A mate earns $1800/wk clear doing a trade. Another earns $600 with their uni degree and mortar board. I run my own business..... . Now which is the better option?

I will be sending my kids to private school but they wont be swallowing that crap teachers pedal that you have to go to uni to get ahead. From where I sit, uni isnt all that great. Making money vs making a difference to the world would be a better argument.

PS- I drew my 'college fund' and bought 'Australian Hospital Care' a few years back. FOURBANGER!

Click to expand...

Milk Man, I agree that how much money a person can earn is not always directly proportional to the person's education background. It might be due to the skill demand in the economy but some are cyclical. I personally think it is always better to give your kids the choice. We are all different.