How to help your children (and grandchildren) financially

Brisbane Business Accountant - Children - how to help financially

There are many ways you can help your children and grandchildren financially. Here’s a few simple ways to help with home deposits and retirement funds.

For parents

Tip 1: How to give your child a start with his or her home deposit

Step 1:

On your child’s 1st birthday, start putting $100 a month into a separate bank account (preferably a high interest online account).

Step 2:

On their 2nd birthday, invest the balance (a minimum of $1200) into a managed investment (high growth portfolio), along with $100 per month via automatic bank deduction.

Step 3:

On their 20th birthday you can cease contributions, but let the accrued money stay where it is (you can now set aside the $100 a month to partly cover the costs of the 21st party!)

End result:

When your child reaches 21, you will have $50,000 to give them to assist with a home deposit.

Assumptions

  • 7% pa net return for the high growth fund & nil return for bank account

Note

  • Seek advice on the ownership and investment type with regards to income and capital gains

Tip 2: How to give your child an extra $1 million when he/she retires

Step 1:

When your child is born, start putting $20 a month into a separate bank account (preferably a high interest online account).

Step 2:

When they start Grade 1, invest the balance (a minimum of $1000) into a Superannuation fund (high growth portfolio), along with $100 per month via automatic bank deduction. (Yes, you can open a Superannuation account for a child.)

Step 3:

On their 13th birthday you can cease contributions, but let the accrued money stay where it is (you can now use the $100 a month to cover the extra costs that you will have now that they are a teenager or you can add the monthly amount to your own super!).

End result:

By the time your child reaches retirement age (currently 67), they will have accrued just over $1 million.

Assumptions

  • 8% pa net return for the high growth fund & nil return for bank account
  • Child is age 5 entering Grade 1

For grandparents

How to help your grandchild retire with an extra $1 million

Only one step!

When your grandchild is born, put $6000 into a Superannuation fund (high growth portfolio).  (Yes, you can open a Superannuation account for a child.)

End result:

When your grandchild reaches retirement age (currently 67), they will have accrued just over $1 million.

Assumption

  • 8% pa net return for the high growth fund

General advice warning: The advice provided is general advice only, as in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.