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Strategies for soaring school fees

by | Aug 14, 2016 | Australian Economy, Budgeting, Debt Management, Finances, Investments, Savings

With private school fees rising each year, it pays to start saving early.

Most parents believe a good education is an investment in their child’s future. But with the total cost of a private-school education approaching up to $500,000, finding a way to fund that investment can be daunting.
“Our research shows that sending children to private school is the second-biggest financial concern for parents, behind ensuring quality healthy food is on the table, so we know this is a top priority for many families,” says ANZ managing director, products and marketing, Matt Boss.
Annual tuition fees for elite Sydney and Melbourne private schools are close to $30,000 a year, but that is just the beginning. Parents can expect to pay significantly more when extracurricular activities, uniforms, laptops and other necessities are added in.
According to the Australian Scholarships Group Friendly Society, the total cost of sending a child born in 2015 to private school from kindergarten through to year 12 is $456,933. That’s a national average. You will pay more in Sydney and Melbourne, but less elsewhere.
Key tips

“I liken it to retirement – you can’t start saving five years out if you want to meet your aspirations,” says John Velegrinis, chief executive of the society. “We advocate starting early with at least a small amount and increasing savings as time goes on.”
ANZ research showed only one in 10 parents start an education savings plan when their children are young.
ANZ commissioned the research as part of the launch of ANZ School Ready, an interactive tool to help parents forecast the true cost of sending children to various schools around the country.
“While not everybody wants to send their children to private schools, the site allows parents to forecast the true cost of those schools and helps them better plan for one of the most important investments they will make,” says ANZ’s Boss.

Education costs have been rising at twice the rate of inflation for the past 10 years, or an average of about 6 per cent a year. So any savings plan needs to provide a return above inflation.
ANZ research showed 46 per cent of parents identified a savings account as the key form for funding private schooling. But with most savings accounts and term deposits paying interest below 3 per cent – and that’s before you pay tax on the income at your marginal rate – it pays to consider the alternatives.

Your mortgage

Using the redraw or offset account attached to your home loan is a simple solution. Even when interest rates are low, as they are now, any savings you park in your mortgage earn an effective after-tax return equal to your home loan interest rate. According to Canstar Research the most competitive variable home loan rates are currently a bit below 4 per cent, which is well ahead of inflation and bank account interest rates.

Investment portfolio

Parents with a longer time frame might consider investing in managed funds. The easiest way to build a diversified portfolio of assets including exposure to local and international shares, property, fixed interest and cash is via managed funds. Some managed funds even allow you to set up a regular savings plan. If it sounds complicated, speak to a financial planner. And invest in the name of the parent expected to be on the lower tax bracket to maximise the after-tax outcome.

Insurance bonds

Personal finance commentator Noel Whittaker says insurance bonds can be a tax-effective choice, especially for parents on higher incomes with a time horizon of at least 10 years. Rather than hold investments in your own name where earnings may push you into a higher tax bracket, investment earnings from insurance bonds are taxed inside the bond at the corporate rate of 30 per cent. This means you don’t need to account for them in your annual tax return.
And grandparents can invest in the bonds without affecting their pension entitlements. Insurance bonds can also be transferred to the kids at any time with no capital gains tax.

Education savings plans

Specialist education funds allow you to make regular payments or a one-off lump sum. There are funds designed for primary, secondary and post-secondary education. Velegrinis says returns have averaged around 5 per cent over the past three years.
As these funds are registered as educational scholarship plans they attract tax benefits that are passed on to families.
While the cost of private school education can seem prohibitive, many parents save money by sending their children to local, public primary schools before going private for their secondary education. Religious systemic schools may also be a financially attractive alternative.
Whatever school you choose, the sooner you begin a savings plan the easier it will be on your household budget.

Putting your Goals First

by | Aug 9, 2016 | Economy, Finances, Investments, Money, Retirement, Savings, Wealth

A goals-based investment approach isn’t focused on ‘beating the market’.
It’s about tailoring your investments to meet your personal goals.
Performance comparisons are unavoidable in the investment world. Every day you see investment managers  measuring their success by how much they’ve outperformed the market, or their peers, over a given time period.
The problem with this is that most people don’t invest because they want to beat the market. Most people simply want  to make their money work harder so they can improve their lifestyle, educate their children or save for their retirement.
So why not start with the end goal and work backwards to find the right investments? That’s essentially what a goals-based investment approach does.

A tale of two investors

Let’s look at two investors who have very different circumstances:

  1. Harriet is looking to save $100,000 to put towards a house deposit in the next 2-3 years.
  2. Carla is retiring soon and looking for an income of $60,000 every year for the next 20 years.

These two women are likely to have very different investment profiles. For example:

  • Harriet has a shorter timeframe, so she may not be able to take as many risks with her money (bearing in mind she may not have time to wait for markets to recover from an unexpected downturn). Harriet also needs to make  sure she will be able to access her entire lump sum at once, possibly at short notice when she finds a home,  so liquidity is important.
  • Carla has a longer timeframe, so she can afford to invest in higher-risk assets knowing she has more time to recover any short-term losses. Because she needs income, her investments will be geared towards those that pay high levels of interest or dividends. Liquidity is less of an issue for Carla as she is likely to leave the bulk of her money invested for the long term.

These two investment strategies will look very different. But one thing both women have in common is that they have  a specific goal that doesn’t relate to any particular market benchmark or index.
This important change of mindset can help investors become less distracted by what the markets are doing in the short term. It also gives you something more personal and more meaningful to measure the performance of your investments against.
After all, you’re investing to achieve goals, not returns. So isn’t that what you should be focusing on?
 
 

Adviser Launches Hunger Project crowdfunding campaign

Adviser Launches Hunger Project crowdfunding campaign

by | Jul 1, 2016 | In The Media

Adviser Director of Wealth Planning Partners, Amanda Cassar has launched a crowdfunding campaign to raise $10,000 for The Hunger Project (THP).

To support the campaign, Ms Cassar plans to go to Ethiopia as part of the Business Chicks Leadership and Immersion Program.

Money, Money, Money Must be Funny in the Small Business World

Money, Money, Money Must be Funny in the Small Business World

by | Jun 22, 2016 | In The Media

“I work all night, I work all day to pay the bills I have to pay. And still there never seems to be a single penny left for me.” If you’re a bit of an ABBA tragic like me, chances are you’re familiar with these lyrics.

Sometimes running your own business starts as the dream, and then the reality of making ends meet turns it into more of a nightmare.

You’ve probably heard the old cliché that ‘cash is king’. I’d actually like to take issue with and declare that ‘cash flow is the true king’. When running a small business, cash flow is paramount, and the lack thereof can be severely frustrating.

Watching others in business splurge before the end of financial year to save tax may even bring on a touch of the green-eyed monster, especially when we’re not in a position to be able to do the same. But don’t worry – chances are nearly every small business has had cash flow issues at some stage, and some sleepless nights while becoming a profitable enterprise.

I Have a Plan…

Depending on what business you’re in, sales can be seasonal, or you have some much better months than others. If you’ve been going for a few years, check your historical data in your accounting software tool or system and see when your highs and lows in income traditionally fall.

If you’re in financial services, just before the end of the financial year is the best month for you; retail may be November and December; spring months for wedding and baby services; July to October for bookkeepers and accountants, with quarterly spikes for BAS returns.

Conversely, there will likely be times when things are much slower. Building services and offices traditionally shut up shop for part of December and January. Take a look at what happens for you.

Can you use the slower months to launch some marketing or sales campaigns? Is it time to get on top of some social media advertising or do other activities to stimulate sales when you know it will be a little quieter?

Also, quick invoicing is key to maintaining healthy cashflow, which can be easily managed through software tools such as QuickBooks Online. Falling behind on your invoices by taking notes to action them later can leave you without income for periods of time, which you want to make sure you avoid. So software can assist here in producing and sending off invoices instantly and on your mobile right then and there so nothing slips through the cracks.

All the Things I Could Do…

Chances are you know when your big expenses fall due. Insurance premiums, extra wages, utility costs and higher stock needs. Again, check your monthly data, whether through QuickBooks Online or another tool, and watch for the pattern to emerge.

Are you able to start smoothing some of the spikes? Can you ensure big bills aren’t due in the quiet months? Can you allocate more profits from the good months to future bills? Are you able to change when the annual payment falls or adjust payments to half-yearly or quarterly?

If it’s really tough, sort your bills into the ‘must pay’, ‘important to pay’ and ‘flexible options’ groups. Prioritising expenses is a great plan!

Another top tip is to invest in a payroll service if you don’t already have one. Accounting for wages, superannuation, GST and other taxes can take a lot of time, especially for the already time-poor business owner, but a good payroll service can be invaluable. You’ll always know exactly where you stand and how much to allocate to cover costs. Check out the benefits of QuickBooks Online payroll services and see what benefits it can bring to your business.

Things can get a little rough in small business and learning a few tricks to keep your head above water will help you stay positive, maintain focus and in control enough to turn a healthy cash flow once again. It may also mean you don’t need to go to Las Vegas or Monaco and win a fortune in a game.

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Insuring Your Teens

Insuring Your Teens

by | Jun 7, 2016 | Insurance & Protection

It’s devastating to watch the nightly news and see reports of young drivers, especially P platers, who are fatally injured or worse, killed on Australian roads.  As a mum of two P-platers, it certainly concerns me.
Unfortunately, there are no signs of this problem reducing. The anxiety and fear parents have about their children driving are real, and are highlighted by the figures below:

  • 45 per cent of all young Australian injury deaths are due to road traffic crashes
  • Of all hospitalisations of young Australians, almost half are drivers involved in a road traffic crash and another quarter are passengers
  • Young drivers (17 – 25 years) represent one-quarter of all Australian road deaths, but are only 10 – 15% of the licensed driver population
  • A 17 year old driver with a P1 licence is four times more likely to be involved in a fatal crash than a driver over 26 years
  • One-third of all speeding drivers and rider in fatal crashes are males aged 17 – 25; 6 per cent are females aged 17 – 25

References
Australian Institute of Health and Welfare (2007). Young Australians: their health and wellbeing. Cat. no. PHE 87. 2006, Canberra: AIHW, available here.
Parents of teenagers are aware of the above risks, especially as their children get closer to driving age. The emotional impact resulting from these events are immeasurable. However, the financial stress can be limited with the right strategies in place.
A lump sum benefit may assist in providing a young adult with medical help and rehabilitation. It may also allow a working parent to cease working and provide care and attention to their sick child.
Child Cover – A general overview
Child cover pays a lump sum benefit if the insured child suffers a specified traumatic illness or passes away. Some of the specified conditions covered in this product are consistent with conditions suffered from a car accident, such as:

  • Severe burns
  • Major head trauma
  • Loss or paralysis of limb
  • Death

Minimum entry age: 2, Maximum entry age: 15
Expiry age: 21 ( with an option to convert to Life Cover with optional Trauma without medical underwriting)
Minimum sum insured: $10,000, Maximum sum insured: $200,000
 
Case Study:
 
Jennifer and Adam speak to their financial adviser regarding their wealth protection needs to protect their young family financially. They have two children, Harry and Gemma, who are 15 and 13 years old respectively. Like all typical teenagers, Harry can’t wait to get his licence and go out for drives with his mates. Jennifer and Adam understand the risks with young drivers and they admit to having concerns.
Jennifer and Adam’s financial adviser recommend Child Cover as an added option to their risk strategy to address these concerns.
Tragically, 3 years later, Harry was a passenger along with 3 other teenagers in a car being driven by a P plater. Harry suffers severe burns to over 40% of his body and head trauma. Jennifer and Adam’s Child Cover policy paid a lump sum benefit of $200,000. This benefit enabled them to provide their son with the appropriate medical care and rehabilitation. In addition, Jennifer used some of the funds to enable her to take 6 months off work to be by Harry’s side during this difficult time.
 
Don’t hesitate to get in touch with one of the Wealth Planning Partner’s advisers now for more information on how we can assist your family.