This week my extended family has welcomed into the world Ike Walter Vidler (congratulations to Robbie and Amber) and it got me thinking about all the cool things you can do in planning for your children’s future.  With the cost of education and houses being up there here are my few tips around the best way to save and help your kids get the best start they can in life.

Insurance or Imputation Bonds

These are one of the oldest style of financial products which were created back in the 80’s (when I was still in nappies and the financial planning industry was just starting out).

I would suggest these over a scholarship fund as they give you the ability to add regular savings and use the funds for anything you like once it has been vested for the time frame.  However the structure is one where you do not pay tax if the investment is ‘vested’ for 10 years.   The limitation is the 10 year period that the money has to be invested to gain the tax free status.  There is also a limitation on how much you can put in each year before the 1 year period if reset.  As long as you do not put in more than 150% of the initial contribution to the bond the vesting date will stay the same.

The alternative to this is setting up a trust account for your children, any investment held in trust for a child however needs to have tax paid on it by the ‘trustee’ so if you are putting money into a cash account and paying tax a 30 cents in the dollar you will only get the after tax benefit of 70 cents for each dollar you earn.

The flexibility of the imputation or insurance bond is that you can invest the money into different asset classes and product styles and use the money for anything after the 10 year period, be it education, university or a deposit on a home or helping your children to start their own business.

Without sounding like an advert for The Australian Government, they are helping you with the costs of educating your kids.

The Education Tax Refund provides up to 50% back on a range of children’s education expenses you have probably seen the adverts on the television as school has gone back for 2011 school year.

For the 2010–11 tax year refunds may be as much as $397 for every child at primary school, and up to $794 for every child at secondary school. The amount of the refund increases each year by inflation (based on  the Consumer Price Index).

Check out the website above to see if you are eligible and remember to keep your receipts – you need them to calculate your refund and you may need to show them as proof of purchase and your accountant will love you for it!

If you need assistance in exploring these further talk to a professional but most importantly start your journey to being free around your money and creating wealth with understanding.

Scott Malcolm ( is Director of Money Mechanics (ph: 6257 5557) a fee for service advice firm who are authorised to provide financial advice through PATRON Financial Advice AFSL 307379.

The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs.  Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.