INSIGHTS WITH EVALESCO
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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We believe the true value of financial advice isn’t found in dollars and cents (although this is important too!) but in the peace of mind a financial plan can provide. It’s knowing where you want to go and how to get there, with a dedicated team behind you every step of the way.
We know the impact of good holistic financial advice can make and we have the life experience, technical capability and quality support team that can make that difference for you. We’ve empowered over 1000 families through the delivery of great financial advice, to be healthy, wealthy and happy.
The amount of super you’ll need when you retire depends on your big costs in retirement and the lifestyle you want. The Associate of Superannuation Funds of Australia (ASFA) estimates for a single $44,224 a year and for couples $62,562 a year is how much you may need. This is only an indicator and our advisers assess everyone’s individual circumstances.
The fees we charge for financial advice is only a fraction of the value we derive for our clients, meaning our clients are always better off after seeing us. Rarely do we encounter a new client invested appropriately for their needs, with adequate risk protection, structuring and estate planning provisions in place. Even small tweaks to a financial plan over a long period of time can result in drastically better outcomes for our clients which eclipses the fees of the financial advice. Additionally, you can opt-out of an ongoing fee arrangement at any time.
In our discovery meeting with you our advisers discuss the initial advice fee and the ongoing fees associated with our services.
After our initial phone call to discuss why you are seeking a financial adviser, we arrange a discovery meeting that outlines what is important to you, your current position, our areas of advice, our approach. We then present a Statement of Advice (SoA) to discuss your goals and our recommendations and go through the steps of how to proceed to the implementation stage. After signing the SoA, we discuss your questions, get you to sign the authority to proceed and complete any application forms before implementing the recommendations detailed in the SoA.
One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk. Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future
The information provided on and made available through this website does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Evalesco Financial Services do not warrant the accuracy, completeness or currency of the information provided on and made available through this website. Past performance of any product discussed on this website is not indicative of future performance. Copyright © 2019 Evalesco Financial Services. All rights reserved