Quadrant Financial Planning Wodonga

Providing financial support to your grandchildren can be a meaningful way to invest in their future. There are several ways you can help set them up for long-term security and success.




Setting your grandkids up for the future: A Grandparent’s guide
Providing financial support to your grandchildren can be a meaningful way to invest in their future. From practical steps to financial strategies and legal considerations, there are several ways you can help set them up for long-term security and success.
Financial actions
1. Financial gifts and savings accounts
One off or regular gifts: Consider gifting money when you might otherwise give a physical gift. For special events like a birthday, graduation or a religious or cultural event, deposit a financial gift into a savings account specifically set up for your grandchild. According to the MLC Financial Freedom Report, 18% of grandparents provide one off financial gifts to celebrate milestones or alleviate significant expenses and 16% offer regular financial gifts to support their grandchildren.
Savings accounts: Open a high interest savings account in your grandchild's name. Compound interest helps regular contributions, no matter how small, grow significantly over time.
2. Education funds
Education bonds: These are tax effective investment vehicles designed to save for future education costs. Contributions to these bonds can grow. Income is taxed at 30% within the bond. Withdrawals for education expenses will attract a tax rebate for tax paid within the bond. There may be tax implications for the grandchild.
Paying for school or university: Directly paying for your grandchild's tuition can be a substantial help. This can reduce the need for student loans and the financial burden on their parents.
3. Investment accounts
Custodial accounts: These accounts allow you to invest in stocks, bonds and mutual funds on behalf of your grandchild. The assets in the account legally belong to the child but are managed by you until they reach adulthood.
Superannuation contributions: If your grandchild earns an income, consider making contributions to their superannuation fund. This can provide a significant boost to their retirement savings. Concessional contributions count towards a cap and penalties may apply if the cap is exceeded.
Practical steps
1. Financial education
Teach financial literacy: Share your knowledge about budgeting, saving and investing. Encourage good financial habits from a young age. The MLC Financial Freedom Report highlights how financial support from grandparents can lead to greater financial satisfaction and stability later in life. The report shows that 43% of Australians surveyed who received substantial financial support from their grandparents are extremely or very satisfied with their current financial situation, compared to 17% who did not receive such support.
Involve them in financial decisions: When appropriate, involve your grandkids in discussions about money. This can help demystify finances and prepare them for managing their own money.
2. Support for extracurricular activities
Funding hobbies and interests: Financially supporting your grandchild's hobbies, sports or other extracurricular activities can help them develop skills and interests that may benefit them in the future.
3. Housing and transport assistance
Living arrangements: Allowing your grandchild to live with you rent free or at a reduced rate can help them save money for other important expenses, such as education or starting a business.
Helping them buy a car: Nearly one in ten grandparents (9%) help their grandchildren achieve a degree of independence by assisting them with their first car purchase.
Other important considerations
1. Estate Planning
Wills and trusts: Ensure your Will is up to date and consider setting up a testamentary trust for your grandchildren. These trusts can provide financial support for specific purposes, such as education or buying a home and can be managed according to your wishes.
Power of Attorney and guardianship: Designate a trusted individual to manage your affairs if you become unable to do so. This ensures that your financial support for your grandchildren continues seamlessly.
2. Tax implications
Understand gifting rules: If you receive government support or a pension, there may be caps on the amount you can gift without affecting your pension. Make sure you check prior to gifting significant sums.
Consult a financial adviser: Work with a financial adviser to understand any social security and tax implications of your financial gifts.
Avoiding risks to your retirement savings
While supporting your grandchildren is a noble goal, it's crucial to ensure you don’t compromise your own financial security. Here are some strategies to avoid risks to your retirement savings:
1. Diversify your investments
Diversification can help protect your retirement savings from market volatility. By spreading your investments across different asset classes, such as stocks, bonds and real estate, you can reduce the impact of any single investment's poor performance.
2. Maintain an emergency fund
Having an emergency fund can provide a financial cushion in case of unexpected expenses.
3. Adopt a sustainable withdrawal rate
The 4% rule is a common guideline, suggesting that you withdraw 4% of your retirement savings in the first year and adjust for inflation in subsequent years. This can help your savings last longer during your retirement.
4. Consider annuities or IRIS products:
Speak to your financial adviser about whether annuities or an innovative retirement income stream (IRIS) product may work for you to reduce the risk of outliving your savings.
5. Regularly review your financial plan:
Periodically reviewing your financial plan with a financial adviser can help you stay on track and make necessary adjustments.
6. Limit large financial gifts:
While it's generous to support your grandchildren, it's important to balance this with your own financial needs. Consider setting limits on large financial gifts to ensure your retirement savings remain intact.
Inspiring the next generation
Your financial support can do more than just provide immediate benefits; it can inspire your grandchildren to achieve their own financial independence. By setting a positive example and providing the tools and resources they need, you can help your grandchildren build a solid foundation for their future.
Setting your grandkids up for the future involves a combination of financial gifts, practical support and intentional planning. By taking these steps, you can help your grandchildren have the financial stability and knowledge they need to achieve their dreams. Your legacy will not only be remembered in the form of financial support but also in the values and lessons you impart.
References
• MLC Financial Freedom Report 2024
• Australian Taxation Office (ATO) guidelines on gift tax

Source: MLC

Retirement can be a golden opportunity to make changes to your lifestyle and routine and boost your wellbeing in the process. Find out more about the benefits of using your extra leisure time to stay active and connected to your community.




Enjoying your retirement
Retirement can be a golden opportunity to make changes to your lifestyle and routine and boost your wellbeing in the process. Find out more about the benefits of using your extra leisure time to stay active and connected to your community.
Making the most of a new life stage
If you’ve been working for much of your life, starting retirement is likely to bring some significant changes to your routine. By taking the opportunity to make the most of all this extra time on your hands, you can plan for a retirement that’s as exciting as it is rewarding. Enjoying a retirement that keeps you active and social is also a great way to invest in your mental and physical health, now and in the future.
More time for your health and wellbeing
Retirement often means healthy and positive changes to lifestyle habits. Compared with their working peers, retired people are likely to sleep more, spend less time sitting down and more time being physically active.
A major life change like retirement creates a great window of opportunity to make positive lifestyle changes – it's a chance to get rid of bad routines and engineer new, healthier behaviours. When people are working and commuting, it eats a lot of time out of their day. When they retire, they have time to be physically active and sleep more.
Whether it’s spending more time planning healthy meals, getting into the habit of going for a regular walk or bike ride or joining a local gym, sports club or team, there are plenty of ways you can use your time in retirement to keep yourself in the best of health.
Stay social to boost your health even further
Some of these activities will also come with the added bonus of new social and community connections. After stopping work, you could find that your social circle will change. Opportunities to connect with work friends may be less frequent, particularly if they haven’t retired yet or you’ve made a move to a new location as part of your retirement plan.
It seems pretty obvious that keeping up with friends and family will be good for your mental health, regardless of your age. Seeing more of friends in your later years has a very positive impact on life satisfaction, as social isolation can actually be as bad for your health as smoking and drinking alcohol and has a bigger impact on life expectancy than lack of exercise or being overweight.
It can take time to build up your social network in retirement, so start to make a plan for how you’ll connect with your local community while you’re still at work. Your local council will be a good resource for information about groups you can join and finding out what’s going on locally. Searching online is also a great way to discover activities you’d like to take part in.
Feel good about giving back
Volunteering can also be a great way to meet people and make a positive contribution to your community. If you find yourself missing the routine and sense of purpose you experienced with your job, volunteering can be a good substitute. Keeping active and getting involved in voluntary work definitely brings retirees a lot of benefits that would have been brought about by keeping on working.
Speak to local community groups or search online to explore opportunities that interest you or could benefit from your skills. As well as organised volunteering programs, you might be interested in sharing your skills in a mentoring or tutoring arrangement. You can choose to offer your time and skills as a volunteer or by working part time if you need an income boost.
Spread your wings
Your retirement is also the ideal time to tick off some destinations on your bucket list. Many companies organise travel programs specifically suited for people who are travelling in retirement. These trips can be ideal if you’re looking to meet and travel with like minded people and have all the hard work and planning taken care of. Remember to arrange insurance to make sure you’re covered for unforeseen events and any medical issues on your travels.
Keeping busy on a budget
Staying social and active in retirement doesn’t have to cost much. While some interests, like golf or crafts, may involve spending on memberships and materials, there are plenty of recreation activities that are low cost or even free. Investing in a sturdy pair of shoes is all you need to join a local walking club and showing your support at a local sports event likely won’t cost you a cent.
With life expectancy rising, you could have many years ahead of you to enjoy new interests, friendships and opportunities to support your community. But it’s also important to plan for a secure retirement income so you can enjoy all these things with peace of mind about your financial future.

Source: Challenger