The cost of educating children (such as books, uniforms, excursions and the like) is ever increasing and looking into the future there is no relief in sight, whether you opt for public or private schooling of your children. Some parents, however, are taking a long term view and implementing plans for specific purpose saving using, for example, investment bonds (also known as “education funds”) which are increasingly popular.
The investment income of an education fund is taxed at a maximum rate of 30 cents in the $1 and, as long as the income accrues within the fund, there is no assessable income to declare for either the investor or the student.
Other options can be to use a discretionary family trust to hold investments earmarked for the cost of educating children; increased repayments of non-deductible debt, for example, the home mortgage can be another option, as could be increased contributions to a superannuation fund for use after preservation age is reached!
Whatever method is utilised, it is important to start sooner rather than later so the benefit of compounding may be obtained over an extended period.