Some financial relief for parents with school children

Some relief for parents with school children

Raising a child is rewarding, but can also be very expensive. The cost of schooling is a major factor to consider when budgeting to include children, and can have a huge impact on your savings account. Obviously, the further they go into the education system beyond secondary school, the more it costs.

The cost to raise a child in Australia

According to research by AMP and NATSEM conducted in 2012, the cost of raising a child in an average family can be anywhere between $474,000 and $1,097,000 depending on how much study they do. By the end of primary school, parents can expect to have cumulatively spent between $327,000 and $641,000 and this jumps to between $474,000 and $948,000 by the end of secondary school.

Tertiary education is a whole other kettle of fish, and the costs, according to the research, are estimated to increase to between $812,000 and $1,097,000. Unless you’re a multimillionaire, these kinds of figures can be daunting. At this stage, you could be wondering, how can you reduce the cost of raising children, and avoid mounds of credit card debt?

There is plenty of government assistance available, and contrary to what you may think, it’s not limited to only the lowest income earners. There is something out there for most families to benefit from.

School kids Bonus

This payment came into place in January 2013, and replaced the previous Education Tax Refund. The scheme runs until July 2016, and from January this year, it is means tested.

A primary age child entitles parents to a payment of $422 a year, and parents received about twice as much per child in secondary school. Eligible families will receive the payment in two instalments per year, without the need to make a claim, as it’s an automatic process.

Assistance for Isolated Children

This scheme is operated for the benefit of children that cannot attend an appropriate public school because of disability, special health needs or because they live in an isolated area. The maximum payment for the distance education allowance is $3,948 per year, while other forms of assistance have differing fortnightly or annual amounts.

Payments received under this scheme are not taxed and, for the most part, are fee of income and asset tests.

State-specific schemes

Depending on where you live in Australia, there are various state government funds that help with some costs of educating your children. Here are some of the more prominent ones:

Textbook and resource allowance — Queensland
The School Card Scheme — SA
Student Assistance Scheme — Tasmania
Secondary Assistance Scheme — WA

There are also public transport concessions for school-aged children in most states, as well as government assistance for families in need. While raising a child can be expensive, you don’t have to go it alone. Investigate the resources available to you through your local government, school or community groups — every bit counts!

And of course, while proper planning is essential, the cost of education should not be the only consideration when it comes to planning to have children. Many of life’s necessities have some financial cost to them, whether it be a car loan for transport, or a mortgage to provide a roof over your head. While all of these things do cost money, they don’t have to be unattainable.

With effective budgeting, using credit card comparison tools or home loan calculators, you can make your finance stretch further than you thought — but don’t put yourself under pressure. And as previously highlighted, there are many ways to reduce the costs associated with putting children through school — which you should take advantage of if you can. With the way the marketplace is becoming increasingly globalised and complex, investing in your children’s education is a vital step towards empowering their future.

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Learn more about savings accounts

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

Do I have to claim interest on my savings account?

When you lodge your income tax returns, you must include in the documentation all your sources of income, including bank interest. Your bank will report any interest you earn on the funds in your savings account to the Australian Tax Office (ATO). When the ATO then compares this information with your tax returns,  you also need to have mentioned the interest earned. If there is any discrepancy, you’ll receive a letter from the ATO. 

Avoid this situation by ensuring you receive your bank statement with interest noted. Then declare the interest in your tax returns and pay the tax that’s applicable based on the income tax rate.

You only need to claim your share of the interest earned for joint accounts. If you manage an account for your child and receive or spend money via this account, you will also need to report any interest earned from said account.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

Should I open multiple savings accounts with UBank?

UBank offers customers an opportunity to make the most of their savings by opening multiple savings accounts. Having multiple savings accounts with UBank may be ideal for savers tracking different goals in separate accounts. 

It’s important to note that to earn bonus interest, you will still need to meet the conditions of the UBank savings account every month. If you don’t make these deposits, you will receive the standard interest rate, which is typically lower. 

Keep in mind that you won’t earn bonus interest on your UBank savings account in the month an account is opened and if you open multiple savings accounts with UBank, you'll start earning any bonus interest the following month. 

It's also not yet known how long the special interest rate will hang around for, so please check with your bank for more information.