Did you know that you can start a Super fund for your kids?
Most parents want to give their kids the best financial backing they can, but our kids needs are going to be very different from the needs we had.
It has been said that the first person to live to 200 has already been born.
The biggest financial threat for most of our kids, is not going to be the cost of housing or education but that continued medical improvements that mean they could possibly live to 140 or 150 years of age and thereby outlive their financial resources.
So, instead of putting money in a savings account to help their near term expenses why not take care of their longer term needs when they’re going to need it the most.
You’ll also help them get access to the greatest financial tool available – compounding interest.
I’ve included here an example so that parents can see the benefits of long term planning for their kids.
Jane’s son Mark is 18 and she puts $2,000 into his employer Super to help him get it kick started. By the time Mark hits age 60 that one deposit will have grown to $56,939.
At the same time, she made a $2,000 deposit into a Super fund for Mark’s brother Jack who is only 8. The difference of 10 years means that when Jack reaches age 60 his deposit will have grown to $126,386*.
That’s more than double for only 10 years extra.
Of course, these amounts will be substantially boosted if you make additional contributions and will be boosted by their SG when they hit the workforce.
If your parents are planning on leaving something in their Wills for your kids, they can deposit up to $150,000 per year as a non-concessional contribution.
*examples assume an 8% return net of fees and taxes.