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What’s The Perfect Age? (Part 2)

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27 November 2011

Last month we looked at one of the most commonly asked questions “When is the perfect age to start teaching your children the value of money?” and what savings accounts you should you open.

This month we’d like to continue our discussion on this by looking at the investment options available when setting up an Education and Wealth Account and what to do if you simply can’t afford it.

What investment options are available when setting up an Education and Wealth Account?

There are many different investment options available on the market to invest in which may seem daunting for most parents. Another important factor you have to consider is the tax implications of that investment, as children and parents are taxed quite differently in Australia. Not only does it affect the net returns of the investment, by holding the investment under the wrong person’s name (such as investing in the name of either parent), the income from the investment can adversely affect family tax payments, push them into a higher tax bracket, or hinder eligibility for the superannuation co-contribution, just to name a few implications. Therefore, it is important to seek advice from a qualified financial planner before making any of these decisions.

One investment vehicle often overlooked, which you may wish to discuss with your financial planner, is an Investment Bond. Referred to as tax-paid investments, these bonds in Australia are taxed at the corporate tax rate of 30% subject to being held for a minimum of 10 years and do not need to be reported on an investor’s tax return. Therefore, if both parents are working and have a tax rate of 30% or higher, an investment bond would be quite an attractive option.

What if you simply can’t afford it?

As at 1 July 2004, the government introduced the Baby Bonus to families following the birth (including stillborn babies) or adoption of a baby, in recognition to the extra costs incurred. This bonus is administered by the Australian Taxation Office and replaces the Maternity Allowance.

For the 2011/12 financial year, the total Baby Bonus amounts to $5,437 (which is indexed annually) and is paid over 13 equal fortnightly instalments for each child.

Certain criteria such as the Family Income Limit, apply to receive this bonus, so visit or ring the Australian Government Family Assistance Office for further information to ascertain whether you are eligible.

If you do apply for this bonus, why not use a portion or the whole amount of this money to set up both accounts?

Every dollar you invest on behalf of your children whilst they are young, will make high end expenses such as education more affordable.

What about our own financial situation?

Finding out you’re about to have an addition to your family brings joy and excitement. It may also lead you to start thinking about your own financial situation and ask yourself questions such as …

  • Will your budget stretch to cover all expenses if you take time off work?
  • How much time off work are you entitled to? Do you want to take time off work? Can you afford to take time off?
  • What government benefits will you be entitled to?
  • How will this affect your family wealth creation plans?
  • Now that you are responsible for someone other than yourself, what would happen if you couldn’t work due to an accident, illness or even premature death?

These are all valid questions and important to answer. You see, most people spend more time planning a weekend away than they do looking after the most important aspects of their finances. A professional financial planner will be able to work with you, and in less than a few hours will be able to give you a plan and direction.

Think about this, if you were planning a trip to Paris, don’t you think if you had an expert guide who had lived in Paris for many years that they would be able to help you get the most out of your trip? Well a professional financial planner will save you time, help you understand the complexities of the current legislation and assist you to put in place the most important things for you and your family. An initial appointment is usually complementary and will last for less than two hours. Wouldn’t this be a great investment of your time?

Looking for more ideas and educational material to teach your kids about money? Go to

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