You want your children and grandchildren to have the best education possible yet school and university fees keep rising. No doubt the money you spend on your kids’ education could be one of your family’s biggest expenses. That’s where ‘grandparents’ may be able to help your children.

The Australian Scholarships Group (ASG) have conducted research on educations costs throughout a child’s life. ASG’s research suggests sending your child to private school from prep to year 12 will set you back $367,569 (per child).

Just what are your savings options

  1. Invest in your child’s name
  •  A common approach is to establish a bank account in your child’s name. However, a child or minor can only earn a small amount of money before paying significant tax.
  • Current tax rates allow a child to earn $416 before paying 66% tax.
  • The current RBA cash rate is 1.5% and may fall lower. This means the return on cash after tax and inflation may be very minimal or negative.
  1. Establish a trading account and buy shares in the name of a lower income producing parent
  • Regularly buying shares for a child or grandchild can be a great way to accumulate wealth. Negatives of this approach include:
  • Account must be set up in the name of the parent as trustee. Tax on income the shares generate will be added to the parent’s assessable income.
  • Each time you buy a parcel of shares you would incur brokerage.
  • In the event shares had to be sold to start paying for education expenses there may be capital gains tax implications.
  1. Add money to an offset account against a home loan
  •  The key to this approach is discipline. Money in an offset account can often be used for renovations, holiday’s etc. and you may spend the money allocated towards your child’s education.
  1. Establish a Family Trust to invest
  • A Family trust is a tax structure which allows you to distribute income to other family members and take advantage of lower marginal tax rates. This is a more complicated approach and for a smaller amount of money may not be worth the costs of establishing and ongoing compliance requirements.
  1. Use an Investment Bond – this is our preferred approach
  • Simply put, an investment bond is a ‘tax paid’ investment.
  • This means that the tax on investment earnings are paid by the bond issuer at the current company tax rate of 30 per cent rather than in the individual’s name. After ten years from the start date, the proceeds do not incur capital gains tax. Note franked dividends can reduce the 30% tax rate in the bond.
  • You can add up to 125% per year of your prior year’s contribution. That is if you started with $2,000 you could then add up to $2,500 to the bond next year and so forth.
  • You can withdraw earlier than 10 years, however you would need to the include the earnings in your personal income tax return. However, you will receive a full credit for the tax already paid, so there is no doubling-up.

Which is the best option for you?

The answer to this questions is depending on your situation. The offset account provides a certain rate of return, however; it can start to become harder to monitor especially if you do not have the discipline to not touch the money.

An investment bond can provide a number of tax benefits and be allocated as a separate pool of money for your child or grandchild’s education. Investments Bonds can also be set up so that they transfer to the child upon reaching a certain age, which can provide greater certainty.

One thing is for sure – regularly savings does add up! Keep putting money aside and after a few years you should have a signiant amount for educations expenses.

Should you wish to start saving for your child’s or grandchild’s education please get in touch with us to see to determine the best approach for you.



The above is general advice only.



  • Must be careful if on Age Pension that giving money to Grandchildren is no caught under the ‘gifting rules’

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Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

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