How to manage the cost of raising children
by Kate Buhagiar | 28 August 2023


Raising grandchildren
Investment options
Split super contributions
Government payments and support available
Family Tax Benefit

Welcoming a new child or grandchild into the world and witnessing their growth is an extraordinary experience. The immeasurable joy of witnessing their milestones is truly priceless. However, it is essential to acknowledge the financial implications of raising a child, especially in today’s ever-increasing cost-of-living scenario. While the exact estimates may vary, it is safe to say that families can expect to spend hundreds of thousands of dollars on living expenses, medical care, and education throughout their child’s lifetime. 

To alleviate the financial burden and ensure a secure future for your family, it is crucial to establish a sound financial strategy and take advantage of available government support. Begin by updating your Will to appoint guardians for your children, providing a safety net in case of unforeseen circumstances. Consider obtaining life insurance and income protection policies to safeguard your family’s well-being. Speak to our Insurance Specialist Dominic De Minaur to discuss your wills. 

Creating a savings and investment plan will provide you with greater certainty as you navigate the years ahead. Regularly setting aside small amounts of money into an education fund or savings account can help alleviate financial stress. Utilise tools like the MoneySmart savings goals calculator to determine achievable milestones. Additionally, consider fee-free high-interest savings accounts or mortgage offset accounts to save cash for short-term needs. 

While preparing for the long term, explore investment options such as shares, exchange-traded funds (ETFs), or listed investment companies. These avenues offer potential capital growth and diversification at a relatively low cost.

Looking ahead, it’s essential to consider your superannuation (retirement savings). If one partner stays at home to care for the children, the other partner can split their super contributions, subject to the rules of your super fund. This allows for a more equitable distribution and ensures that both partners have a secure financial future. Be sure to understand the tax implications and complete the necessary paperwork to take advantage of this opportunity. 

Additionally, familiarize yourself with the various government payments and support available to families. For instance, the Paid Parental Leave Scheme provides support for mothers for up to three months before the birth, with recent extensions for babies born after July 1, 2023. Changes have combined Parental Leave Pay and Dad and Partner Pay into a single payment available to both parents for up to two years after the child’s birth. Ensure you meet the income and work tests and adhere to the required timelines when applying for these benefits. 

Even if you are ineligible for parental leave pay, you may still qualify for the Newborn Upfront Payment and the Newborn Supplement. Additionally, the Family Tax Benefit is a two-part payment designed to assist with the cost of raising children. To be eligible, you must have a dependent child or a full-time secondary student aged 16 to 19 who is not receiving any other payment or benefit, care for the child at least 35 percent of the time, and meet income test requirements. 

For grandparents wishing to provide financial support to their families, gifting money to children or grandchildren is an option. However, it’s important to note that Centrelink has gifting rules for individuals receiving an age pension. You can gift up to $10,000 in one year or up to $30,000 over five years without affecting your pension. Any amount exceeding these limits will be considered as if you had retained it in your own accounts. 

In terms of taxation, gifts and inheritances are generally not considered as income. According to the Australian Taxation Office (ATO), neither the donor nor the recipient will pay tax on a gift if it is a voluntary transfer of money or property, made without any expectation of receiving something in return, and the donor does not materially benefit from it. However, tax obligations may arise in cases where property or shares are gifted. 

By establishing a comprehensive financial plan, leveraging government support, and making informed decisions, you can navigate the financial aspects of welcoming a new child or grandchild with greater confidence and ensure a brighter future for your family. 

There are so many joys of raising little ones, and having a plan to manage the financial implications can let you enjoy the journey. Get in touch with your adviser to create a plan to secure your family’s future. 


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