Education the greatest gift of all

November 20 2018 | Financial Planning

Adnan Glinac, Executive General Manager – Life and Super, Australian Unity

 

With baby boomers – the wealthiest generation in history and living longer and enjoying better health than previous generations – it’s no surprise that their role in Australian families has changed dramatically. More than ever before, grandparents have become active carers and contributors, alleviating pressure on the stretched household budgets and schedules of their children. It’s fitting then, that many celebrated the significant contribution that grandparents and older Australians make to their families as well as the community on Grandparents Day last Sunday.

That grandparents have become secondary carers to grandchildren as the cost of childcare skyrockets is well known. Recent research has revealed that on average, Aussie grandparents are caring for grandchildren for 58 hours per month, the equivalent of $328 million nationally in monthly childcare fees.

What is also widely known is that on a global scale, we are on the cusp of the largest wealth transfer in history, with Australia set to see more than $3 trillion change hands over the next couple of decades as baby boomers pass on their wealth. It’s clear the Bank of Mum and Dad has become one of the nation’s top lenders.

The issue for most, however, is how they can help the next generation without putting a dent in their retirement savings and quality of life. Take the example of education. Today education is up there with some of life’s major expenses like purchasing property and saving for retirement. Education costs over the years has far outpaced inflation. While inflation, as measured by CPI, rose 11 per cent over the past five years, education jumped by an enormous 28 per cent. And, according to the ABS 2015-16 Household Expenditure Survey, the largest increase in household spending was in education, which jumped by 44 per cent in six years.

Attuned to the soaring costs of both public and private education tuition as well as tertiary studies, it’s no wonder that grandparents are increasingly considering how they can support their grandchildren’s education. One way to make a meaningful contribution is for grandparents to invest in education savings. Education funds enable parents and grandparents to make regular contributions of any size, earn interest on their savings and benefit from tax incentives. To give an idea of the prevalence of this, nearly 20 per cent of Australian Unity’s Education Bonds are started by grandparents.

Another idea for grandparents is to reconsider gift-giving. What would typically be spent on a present could instead be gifted or rather invested in an education fund. While savings in an education fund may not cover all education costs, it can alleviate some pressure, particularly when it comes to incidental costs like excursions, sporting equipment, laptops, instruments and exchange programs that can easily add tens of thousands of dollars to education fees every year.

Contributions to education savings will, over time, make a big difference. And, although toys and ‘things’ provide children with joy, an education is the greatest gift of all.

Disclaimer: This article is not legal or personal financial advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every reasonable care has been taken in distributing this article, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information contained within it. Any views expressed are those of the author(s) and do not represent the views of Australian Unity Personal Financial Services Ltd. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Taxation Information in this document should not be relied upon without seeking specialist advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in November 2018. © Copyright 2018
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