Investing in their future
The options for investing for your grandchildren are many and can be complicated. Before you look at how to save you should consider your end goal.
Do you want to pay for school fees or university tuition?
Do you want to help with incidentals like uniforms, books or trips?
Do you want to provide a lump sum for a car at age 18 say, or a home deposit at 25?
Then you can decide:
- Who will own the investment (child, grandparent or the grandparent “as trustee for” the child)? And therefore who will pay tax on the investment? Unearned income (from investments or trusts) is tax free up to a set limit for a minor, after which it is taxed. For more up-to-date details visit the Australian Tax Office www.ato.gov.au
- What sort of flexibility and ease of access is necessary?
- Will you provide an income stream now or a lump sum in the future?
- What effect could there be on any Centrelink benefits?
The most common mistakes made in this area are starting too late, paying unnecessary tax and getting discouraged! Seek advice from your financial adviser to make your plan – then stick to it!
