Every parent wants to give their children a bit of financial assistance where possible. For most families, the two biggest expenses will be housing and education.

Saving for a home deposit

Getting into the property market is one of the biggest financial challenges for young people today. And any head start that mum and dad can provide will be very welcome.

There are no products set up specifically for home deposit savers, although products like investment bonds offer certain tax advantages. So the strategy really comes down to the tried and tested combination of budgeting, a high-interest savings account, and discipline.

Saving for education

The cost of education, especially private schools, is likely to be one of your family’s biggest budget items. So it’s important to start saving early.

The first step is to work out how much money you’ll need, which means thinking about private or public schools, and university or college.

The MoneySmart website crunches some of the numbers for you. According to MoneySmart, if you send two kids to a private high school, at an average cost of $20,000 a year for each child, by the time they graduate you will have spent $240,000 on school fees. And that's not counting extras such as school uniforms, trips and sporting costs.

Public schools are much cheaper but don’t forget to factor in extra tuition fees, text books, uniforms, sports and school camps.

Investment bonds

Many parents use investment bonds as a tax-effective way to save for the children's education, or to give them a head start into the housing market.

Investment bonds can be a tax-effective way to invest for the long term but there are certain rules about contributions and withdrawals that you need to understand. The primary attraction of investment bonds is that earnings are taxed at a rate of 30%, provided the bond is held for more than 10 years. There is no further tax payable when the bond is cashed in. Another benefit is that you can make additional contributions over the life of the bond.

Find out more about investment bonds

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Education funds

Education funds are set up specifically to help you save for children's education. The savings you contribute are invested and when the time is right, you can then put the money you have contributed – plus any 'earnings' - towards the cost of secondary and tertiary education.

There are different types of education funds and most offer attractive tax benefits. So if you’re considering an education fund, think about the following questions to make sure the fund fits your long-term financial plan^1.

Mortgage offset account

If you have a mortgage, you can build up funds in a mortgage offset account. These have two benefits: you can reduce your interest costs, and you can draw on the offset account when school fees are due.

  • What fees will you be charged?
  • How much do you need to invest and how often do you need to contribute?
  • Can other people, such as grandparents, also contribute?
Investment options
  • What investment options are available, and do the suggested timeframes for these options meet the timing of your children's education needs?
Fund purchases
  • What can you use the savings for, for example can you use them for primary, high school or tertiary studies?
  • Do they cover expenses such as clothing, laptops and excursions?
Access to funds
  • What criteria need to be met before you can access your funds?
  • What happens if your circumstances change, and you can no longer contribute to the fund - do you lose all that you have invested?
  • How difficult it is to withdraw your money if your children's priorities change? For example, what happens if your children decide they don't want to do tertiary studies?

Compare your options

You should compare the features of an education fund with other investments such as investment bonds, term deposits and managed funds. In particular compare:

  • Product fees, features and benefits
  • How the fund is taxed compared to how other investments are taxed

Financial advice

One solution rarely suits every person. Why not talk with a financial planner to discuss which options best suit you and your family.

Advice is available through our wholly owned financial planning business, StatePlus.

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This is general information only and does not take into account your specific objectives, financial situation or needs. Seek professional financial advice, consider your own circumstances and read our product disclosure statement before making a decision about First State Super. Call us or visit our website for a copy. Issued by FSS Trustee Corporation ABN 11 118 202 672, AFSL 293340, the trustee of the First State Superannuation Scheme ABN 53 226 460 365. Financial planning services are provided by our financial planning business State Super Financial Services Australia Limited, trading as StatePlus, ABN 86 003 742 756, AFSL No. 238430. StatePlus is wholly owned by First State Super.