Raising children in Australia is rewarding, challenging, life-enriching – and extremely expensive. A recent study by University of Canberra found that for a typical middle-income family, the cost of raising two children in this country is now $812,000 – almost twice the cost of what it was in 2002. The same research also shows that our rates of income growth haven’t kept pace with these spiralling costs.
Child care and education represent a huge proportion of this expenditure, but food, transport, medical bills, clothing, recreational activities and other day-to-day requirements are part of the total too. Some expenses are less obvious, but quite significant: if you must upgrade to a house with an extra bedroom (or two, or four) to accommodate your children, it may cost you an extra six figure sum to do so. With all this in mind, it’s more important than ever to financially plan for your child’s future.
Teach children the value of money from an early age
The first step in setting your children up for a secure future is to educate them about money. A solid ‘savings mentality’ and understanding of responsible spending will serve them well right through to adulthood. Help them set some basic savings goals. Help them to create their own income through casual work, paid household chores or pocket money. Help them differentiate between what they want and what they need. Show them how to save money by shopping during sales and how to track down deals. At the same time, explain the importance of buying quality goods that will last. Outline the dangers of impulse buying and credit card debt.
Talk to a financial planner about investing for your child’s future
Financial planners can help you make sensible long-term decisions about how to manage your child’s financial future. They can explain the potential benefits of having an offset account attached to your home loan, the pros and cons of term deposits and other investment options and how to get the most from your superannuation. They can also provide professional advice on more complex matters, such as the intricacies of setting up a family trust. The money you can save by talking to a financial expert can make a big difference.
Make a Will, and do it right now
If you haven’t made up a legal Will, your spouse, children and other relatives may suffer for it. Studies show that over 45% of Australians do not have a valid Will. Unfortunately, if you die without a legally binding Will, your estate is distributed according to a pre-determined formula (over which you have no control). Have a professionally prepared Will drawn up so you can decide where your money and assets go when you’re gone – otherwise, the Government will decide for you.
Life insurance – a crucial ingredient for your child’s future
The main purpose of life insurance is to provide financial security for your children, spouse or other beneficiaries if anything should happen to you. Life insurance is not just for the main money earner, either. If the stay-at-home spouse dies or becomes incapacitated, how will their partner hold down employment, look after the children and run the household all at the same time? Life insurance is a vital safety net that protects your whole family when they need it most. It can be tailored to suit your requirements and may include a variety of policy options including Life Cover, TPD (Total & Permanent Disability) and Trauma Cover.
Look at your child’s education costs
What are the costs of educating an Australian child born in 2014? According to the ASG (Australian Scholarships Group), the total education cost per child from Prep through to Year 12 in Metropolitan Australia amounts to roughly $63,000 for public schools and around $459,000 for private schools. These figures are reduced in regional Australia . For Aussies already struggling with rising bills and a tight budget, the prospect of private education is not an affordable option. Even those who believe they can afford it must carefully weigh the potential benefits against the substantial long-term costs.
Children’s health matters
You always hear people say “At least I have my health!” But in Australia, many of us don’t have a healthy lifestyle at all. Studies show that our obesity rates are now on a par with the US, and climbing faster than anywhere in the world. About 63% of adult Australians are classified as overweight, and around a quarter of Aussie children. The best way to ensure your child’s future is to keep them healthy – and set a good example yourself. Eat better and exercise more. Find a private health insurance plan that fits your budget, and look at any optional cover that might be useful. Healthy families rule!