Becoming parents is a priceless life experience… that comes with one heck of a price tag.
But clever families use a variety of easy techniques to minimise the financial pain – and maximise the pleasure!
Tip 1: Start saving for your kids’ education early
Even if you don’t want to send your children to private school, education costs can be hefty. Think school fees, uniforms, excursions and after-school activities. The ASG Planning for Education Index shows that for a child born in 2016, education costs for a private education from preschool through to secondary school are forecast to top over $550,000 – yep that’s over half a million dollars.
Education costs have risen more than double the rate of inflation over the past 10 years. Sydneysiders can expect to pay the most for a private education in Australia, while Melbourne parents can expect to pay the most for a government education.
Curious about the potential costs of your child’s education in your state? This education calculator from ASG will estimate your expense.
But the earlier you start saving, the less money you will need to find when eventually it’s time to begin paying fees. So get cracking!
Tip 2: Work the childcare system
Ahead of school starting, childcare is likely to be your biggest expense – possibly higher even than any mortgage. Long day care centres can charge up to $170 a day.
But there are ways of cutting the cost.
John Cherry, advocacy manager at Goodstart Early Learning, advises looking for a centre near home rather than near your job, particularly if you work in a city. He says the pace of price rises in the “fiercely competitive” childcare market has also slowed in the past year, to 3.6 per cent.
Be sure to register for the childcare benefit even if you don’t expect to qualify – you’ll get a 50 per cent rebate, regardless (up to $7500 per year per child). And do it as soon as your child starts – you can only make retrospective claims back one year, which will go fast.
Cheaper still are grandparents, if you can convince them!
Tip 3: Tap into the sartorial snowball
At the outset, setting up for one small child can cost a packet. But dressing (and entertaining) them can actually get cheaper as your circle of friends slowly includes more people with children – preferably ones who are the same gender but slightly older.
Hand-me-downs save so much. And when you are done with the goods, you can pass them on to benefit the next family.
Tip 4: Repay your mortgage and net a whole bunch of extra money
Once your kids get older and more expensive, the more disposable income you have, the better.
Today you have a wonderful, probably once-in-a-lifetime opportunity to clear your debt cheaper than ever, courtesy of record low interest rates. You could also get more bang for your buck by remortgaging with a cheaper lender.
The discounted big bank rate is currently 4.53 per cent while the best rate is way down at 3.35 per cent. This means that just by switching a $400,000 home loan and keeping repayments the same, you would repay a bonus $260 a month – bonus because it hasn’t cost you a cent more than you are used to paying.
This will clear your debt $35,495 cheaper and four years earlier. Infochoice will help you do comparisons and find the best deals. And you can probably find extra money, for example…
Tip 5: Claim all the freebies you can
Get your tax refund paid through the year, rather than at the end of it. After all, why would you let the tax office hold on to it? This works out at an average $2000 a year and you can snare it monthly by filling out a withholding variation application.
Then there are freebies that will also dramatically help the person taking on the bulk of the caring, so perhaps not earning.
A spouse who makes an after-tax super contribution of $3000 for their no- or low-earning partner can earn a tax rebate of up to $540. At the moment, the qualifying income is less than $13,800 but the government is trying to lift this to $37,000.
And while you don’t see the benefit of this next one at the time, it can sure help in future … If either spouse is earning but will make less than $51,021 this tax year, scrounge everywhere to find $1000 extra to pay into super. You’ll get up to $500 free from the government, as a ‘co-contribution’, potentially each and every year.
Nicole Pedersen-McKinnon is a financial educator and commentator who regularly gives money tips on TV.
(This is a sponsored post for ASG, supporting children’s education)