2006 ‘Saving for the Education of Children’ survey highlights
20 November 2006
Australian parents have lofty aspirations for their children’s education, but are unaware of the sheer scope of the expense involved, according to new research1 released today by the Commonwealth Bank.
Cost of Education
- The 2006 ‘Saving for the Education of Children’ survey revealed that the average cost Australian parents expect to pay to privately educate their child through primary and secondary school is $152,000.
- Of those parents who will definitely be sending their child to private primary and secondary school, 55% estimate that it will cost under $150,000. With the actual cost of private education amounting to as much as $270,0002, parents’ expectations are falling more than $100,000 short of the mark.
- Almost half (47%) of parents do not feel financially well prepared to meet the costs of educating their child.
Maternity Payment Usage
- Two thirds of parents (66%) are using their Maternity Payment lump sum to cover short term expenses for their child, such as nappies, baby food, clothing etc. They are also using it to pay for general household expenses (34%); repay outstanding debts (16%); put towards a large household expenditure, such as a new car or kitchen appliance (15%); put towards the home loan (14%); or, use it for something totally unrelated to the child (7%).
- Just over one in ten parents (11%) are using the Maternity Payment to invest in a savings plan for their child’s education.
|Tim Gunning, General Manager, Commonwealth Financial Planning, said, "Using the Maternity Payment lump sum to start an education savings plan is a great way to begin saving for your child’s future. Despite ever increasing school fees and expenses, parents are still grossly underestimating the costs that lie ahead. Starting to save early will help to ease the financial burden in the long term."|
Education Savings Planning
- Although education can be the second largest expenditure next to a mortgage, only one in four parents (23%) would consider meeting with a financial planner to discuss how to plan to pay for education expenses.
- Most Australians do expect to make sacrifices in order to pay for their child’s education. These range from everyday luxuries such as expensive clothes and cosmetics (62%), to everyday family activities such as going to the theatre or sporting events (36%). Other sacrifices include general savings, such as retirement (27%); the annual family holiday (23%); and, home renovations (28%).
- However, almost one fifth of parents (18%) don’t expect to make any sacrifices at all.
- The majority of parents (91%) would like their child to go to TAFE or university and amongst these, 77% are planning to pay all or part of their higher education expenses.
Tim Gunning, General Manager, Commonwealth Financial Planning, said, "A good education is a priority for most parents and with many also looking to pay for all or part of their children’s higher education expenses, we can’t stress how important it is to start saving early – especially if they have more than one child.
"It isn’t just private education that requires careful financial planning, government schooling also incurs costs, from uniforms, excursions, sporting equipment and text books to travel expenses and music lessons."
About the Education Savings Plan:
The Commonwealth Bank Education Savings Plan is specifically designed to help people prepare for education expenses, from pre-school through to a wide range of tertiary courses.
What are the key elements of the Education Savings Plan?
The Plan is simple to use, easily accessible and flexible, with benefits that set it apart from other similar savings and investment products:
- Investors pay NO entry or exit fees3;
- The Plan operates as a ‘scholarship fund’, which means that when a withdrawal is made for eligible education expenses, a special tax benefit may be gained;
- Investors can add to, or withdraw from, their Plan account at any time – although withdrawals for purposes other than education expenses do not qualify for the Education Tax Benefit;
- Whilst the investment remains within the Plan, there are no annual tax return obligations for either the sponsor or the nominated child in relation to the Plan;
- The Education Savings Plan is a flexible product that can be used for education expenses from pre-school to tertiary.
- There are four investment options: Capital Secure, Balanced, Diversified and High Growth. Investors can switch between investment options within the Plan without any personal tax impact;
- Currently, a maximum of $181,700 per student or child can be invested;
- A Plan can be started at any time after the birth of a child, including after they have commenced school or higher education;
- Anyone over the age of 16 can start a Plan and anyone can make contributions;
- Investors can change the nominated student at any time;
- The Plan is open to everyone. It is not exclusive to Commonwealth Bank customers.
To learn more, simply log onto www.commbank.com.au/educationsavings, visit the nearest Commonwealth Bank branch to collect a Product Disclosure Statement, or call Lifeplan on 1800 888 411.
1 The ‘Saving for the Education of Children’ 2006 survey was commissioned by the Commonwealth Bank and conducted by Galaxy Research online in September 2006 among a representative national sample of 403 parents who have recently had a child and claimed the Maternity Payment from Centrelink.
2 The Australia Institute: Buying an Education: Where are the returns highest? January 2004.
3 Investments and switches into some investment options will incur an investing transaction cost.
For more information contact:
Media Adviser, Media & Issues Management
The Commonwealth Bank
P: 02 9378 2504
M: 0411 080 268