The cost of a child’s education is becoming an increasingly major expense for parents and grandparents.
For a child born in 2016 and who aims to start private school in Year 7, the six years of secondary school will cost in excess of $400,000 (based on current fees of $35,000 per annum and indexed at 5%).
Source: AMP Paraplanning projection scenario – May 2016
Cost of Education
To help you determine the total cost of your child’s education, right through from the primary years to attending tertiary studies, Centuria Life has developed a Cost of Education Calculator below.
This link has been provided with permission for information purposes only and will take you to an external website, which are not connected to KRA Wealth Management or AMP Financial Planning Pty Ltd in any way.
Note: KRA Wealth Management and AMP Financial Planning Pty Ltd does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.
Meeting the Expense of Education
The Complete Education Funding (CEF) program has been specifically designed to substantially reduce the effective cost of education fees. Developed by KRA Wealth Management, CEF combines professional expertise, proven tax effective investment solutions and the benefit of compound investment growth to fund future school fees.
The program assists in calculating the likely future cost of school fees and offers an investment strategy for funding them as they fall due, whether that be on a regular basis, as a single lump sum or a combination of both. If started early enough, either method can provide significant financial benefits and in some cases can reduce the cost of education by over 50%.
CEF Investment Structure
Creating a tailored savings strategy that best suits your personal and financial situation is KRA’s primary focus. Whilst managed funds and personal savings accounts are potential alternatives, the CEF program specifically focuses on investment bonds issued by Centuria Life.
Investment bonds, also known as insurance bonds or growth bonds, provide a long-term tax-effective vehicle for building a child’s education fund. Because they are tax paid after 10 years, investment bonds are ideal as a long term strategy and offer a range of investment options to cater for specific outcomes like education funding.
Benefits of investment bonds
Tax-effectiveness: Earnings within the bond are taxed at a maximum tax rate of 30%, which is much lower that the top marginal rate of 49% (inclusive of Medicare levy). If the money is invested for at least 10 years, then no further taxes are payable on investment earnings.
Simplicity: Bonds are stress-free, easy to set up and give you the ability to make regular contributions that suit your cash flow.
Choice: Bonds offer a wide range of diversified investments.
Flexibility: If the money is not used for education it can be used for any other purpose (funding a gap year, first car, funding out of school activities) with no loss of earnings accrued.
Transfer: A bond can be transferred to a child at 18 years of age, giving them a tax paid, start in life.
Withdrawals: Funds can be withdrawn at any time.
Ownership: A bond can be held in the name of a parent, grandparent or child. Whilst it is possible for a bond to be held in the name of a child who is younger than 18 years of age, it is not tax effective to do so.
Contributions: These can be made each year for any value, and will be considered part of the initial investment period of up to 125% of the previous year’s contributions.
The CEF program is about ensuring your child or grandchild has the very best opportunity to succeed in life and freeing up disposable income for other purposes (such as your retirement planning).
If funding school fees is a financial challenge, it is important to seek advice as early as possible and implement a CEF strategy. The cost of delay is significant and will impact on the outcome.
To discuss the program in greater detail, please contact our professional advisers.