“I have 4 grandchildren that are yet to start primary school and I would like to invest some money to help with their tertiary education. Is there a low-cost way to do this?”
- Question from Josephine in Adelaide
Top answer provided by:
Josephine, this is a great cause and I’m sure your grandchildren will benefit from this generous offer.
Depending on the sum of money you wish to invest and your circumstances around your current situation, for example, your Centrelink status or your taxable income status, may ultimately lead to a slightly different path depending on the circumstances. However, with that being said, I’ll present some ideas...
There are potentially three things that initially come to mind that may be useful in these circumstances:
1. A traditional managed fund and invest in a low-cost investment option that is appropriate for the timeline that you wish to have the funds invested.
2. You could choose a specific type of product called an education bond this has particular tax advantages when used for education purposes, however depending on your circumstances and taxpayer status, it may not provide you significant benefits depending on the situation. But conversely could provide significantly enhance benefits for you and your grandchildren if your circumstances allow. Sometimes, using an investment bond or education bond style of product allows some significant long-term estate planning issues to be dealt with as well, which may also arise as an important issue around this education funding discussion.
3. If you are familiar with direct share investing, maybe a specific themed exchange-traded Fund (ETF) depending on the amount could be of use for this purpose.
Generally, some of the issues that will be important to consider when providing advice around this area are:
- The amount of funds you are thinking to invest as a different strategy may be used for $20,000 compared to $100,000 of funds.
- Liquidity, can you get the funds when you need them?
- Volatility, if you invest in a portion of growth assets, what is the risk that the market drops2 0%
the year you need to withdraw funds?
- Centrelink status, if you invest funds and they grow will this have a negative effect on your personal Centrelink situation.
Depending on the amounts paid for, there may be Centrelink gifting issues to consider.
- Estate planning issues, if you set aside some funds for your grandchildren, what happens if you pass away before the
purpose of your investment has been fulfilled, and then is part of your estate?
In summary, good advice around this area, can lead you to have a very satisfying outcome and assist your grandchildren, and help you understand all the issues.
All the best to you and the kind gesture of assisting your grandchildren’s education.
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