Securing a child’s education is one of the most important investments a parent can make. The rising costs of schooling, whether it’s public or private, mean that planning ahead is vital. One of the most effective strategies is to establish a regular savings plan tailored to your child’s education goals. The following case study demonstrates how one family successfully set up a savings plan and achieved their dream of providing quality education for their child and providing peace of mind they were prepared for their kids’ future.

Planning for Emma’s Future

Jane and Tom Smith, residents of Bendigo, wanted to ensure their daughter Emma would have access to the best educational opportunities. With Emma just 10 weeks old, the Smiths recognised the importance of starting early to spread costs and lessen financial stress down the track.

Setting Clear Education Goals

The Smiths began by estimating the total funds needed for Emma’s education, focusing on her anticipated secondary schooling. They considered tuition fees, uniforms, textbooks and excursions. After researching current costs and factoring in inflation, they set a target savings amount of $100,000.

Establishing a Regular Savings Plan

After seeking assistance from a qualified financial adviser to help them obtain a suitable investment for their child’s future, Jane and Tom were able to determine what was required to achieve their education goal. The plan following tailored advice was as follows:

• Initial Investment: $1,000

• Regular Investments: $425 per month

• Risk Profile: Growth  

With their goal in mind, Jane and Tom reviewed their monthly budget. They made the initial deposit from existing savings and automated a direct debit of $425 into the recommended investment product which had a portfolio suited to their Growth approach with an anticipated investment timeframe of 12 years (until Emma would start secondary school).

Regular Reviews and Adjustments

Each year, the Smiths reviewed their progress to consider if any adjustments needed to best position them to achieve the long-term goal. Jane and Tom found that speaking about their progress and visualising their goal helped keep them motivated towards enhancing their kid’s future education.  

Outcomes

By the time Emma was ready to start secondary school, the Smiths had saved the desired amount of $100,000 to cover tuition and additional expenses. By maintaining the discipline of making monthly investments without touching these savings, Jane and Tom reap a great reward from compounding interest.  

This occurs when you leave the distributions you earn in the account, so that you begin earning interest on your interest. The effect may be small at first, but if you leave the interest to accumulate in the account it can gradually snowball over time and significantly boost your savings.

The savings plan outcome was based on the following assumptions;

• An initial investment of $1,000 being deposited plus monthly additions of $425

• Annual growth rate of 7.25% achieved on the portfolio with the distributions/income reinvested

• Investment timeframe of 12 years