Planning to start a family can evoke a spectrum of positive emotions and additional responsibilities. Our thirties are an interesting time in our lives, we’ve had our fingers burned during our twenties, we’re now starting to settle into a career and now balancing the responsibilities between our career and our partner. Our thirties are also the most expensive period in our lives, weddings, mortgages and of course starting a family. While these events certainly spark joy it’s not without balancing the cost, here’s 6 steps to avoid the financial stress and for maintaining the momentum for your family and financial future
1.Protect Yourself At all times
It’s always prudent to plan for the worst-case scenario with reviewing your personal insurance needs. Your human capital is your greatest asset, and your intellectual property is what is going to allow you to get ahead in a career or small business. By having a complete understanding on where your welfare an livelihood may be exposed is important to consider in the event of a premature passing, sickness or disability. Life, Total Permanent Disablement, Income Protection and Critical Illness cover may not come to mind immediately; when there’s a young family involved, it’s peace of mind knowing that you’re welfare and livelihood is protected at all times.
2.Help from mum and dad?
Once a parent, always a parent. And, irrespective of your age you’re always there to be helping your kids. There are ways beyond just gifting a lump sum of cash which may be contributed towards a family home. There’s also options which may include dividend streaming from family trusts in conjunction with any additional super contributions (see points below).
3.Be clear on your budget
There’s an old saying, revenue is vanity, profit is sanity, cash flow is reality. Our 20s may have been spent foot-loose and fancy free, our mid-late thirties, not any more. ASIC has a useful tool with their free online budget planner.
It’s The way human psychology works is having to make little sacrifices every day is unsustainable; this is due to what’s called hedonic adaptation. When you get a new toy or ‘bigger house’, it feels great at first, and then we revert to the baseline level of happiness.
Does this mean we should budget to live off rice and beans, of course not. It just means we should focus our budget on what truly makes us happy and saving a little extra for that treat or two at the right moment. Tracking and reviewing your expenses will give you the clarity on where to save, and what opportunities are available to spark joy now and in the future. Don’t buy stuff, buy moments.
4.Understand your options with future schooling
So, you thought your wedding was expensive? Well now there’s kids.
Private school fees have grown at a whopping 10% rate every year. This doesn’t alone consider rising inflation and increased mortgage repayments (or rent). Not to mention if going into a private school is on the agenda, there’s at least a $5,000 deposit and a 10-year waiting list!
Depending on your situation and earnings, there’s a structured product call an education investment bond. These bonds have a special tax ruling that allows to take advantage of specific tax rulings which provide a tax-free investment structure on education related expenses. There are certain conditions that you must meet as any withdrawals have to be related to education related expenses. Investment earnings in these bonds are otherwise taxed at 30% and after 10 years you can withdraw the entirety of the bond tax free without any capital gains.
5.Don’t forget your super
Your superannuation is a defined accumulation scheme where any contributions and investment are locked away for your eventual retirement. Making extra contributions now will compound over time boosting your retirement savings and lower your taxable income in the immediate future. Your super also is an effective way of structuring your insurances (see point 1).
6.Is the first home super saver scheme available to you?
The First Home Super Saver Scheme (FHSSS) allows first-time home buyers in Australia to save for a deposit within their superannuation fund. Contributions made to super, including salary sacrifice and voluntary payments, can be withdrawn to purchase a home, up to $50,000 for individuals or $100,000 for couples. These contributions are taxed at 15%, making it a tax-effective way to save. To qualify, individuals must meet eligibility criteria, including never having owned property in Australia before.
There’s a lot of excitement and responsibility that comes in your 30s planning for a family. Understanding your financial options and balancing the future needs of your family warrants a range of financial considerations that can serve to enhance your experience. Important considerations pertain to future education requirements, financial security and a clear understanding of your family’s financial and lifestyle objectives.
