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Use your tax refund to start a savings account for your kids

Use your tax refund to start a savings account for your kids

RateCity shows you how you can invest in your child’s future now with a nifty idea for putting your tax return to good use.

July 20, 2010

Do you ever wish when you were growing up that you had a bit of a head start in life financially? There will no doubt come a time when your kids will be thinking exactly the same thing. But the good news is you can do something about it now and set your kids up for life.

July is tax time, when everyone is busy gathering group certificates, invoices and paperwork to meet accountants to process their tax returns in the hope of getting some of our hard-earned money back. The question is, though, what are you going to do with your tax refund?

Build your children’s future wealth
Why not consider using all or a portion of your tax refund to invest into your children’s future? Obviously this will depend on how much you get back and how many kids you have, but think about depositing a chunk into a high interest savings account to accumulate over time.

As this will be a life-time investment, the trick is to then continue depositing a regular amount of money into the account until they are 18, or whenever you choose.

For example, if you were to deposit your tax return of $2000 into a high-interest savings account then deposit $20 per month for 10 years, at 6.51 the current best rate by UBank (as at July 19, 2010) you will have saved a total of nearly $7200. Depending on their age when you start they will be sitting on a nice nest egg in no time.

Your kids can then use this money to purchase a car or re-invest it to put towards a deposit for a home. If the economy and the housing market is anything like it is now, by the time your kids are old enough to buy a home they will need all the help they can get. They will not only be extremely grateful with the head start you have given them but it may teach them a thing or two about saving and how to save to reach a goal.

And let’s be honest, the more money you can save them the sooner they may be inclined to leave the nest and buy a place of their own (well that’s the idea anyway).

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