We are very new to property investment and are just about to put in an offer on our first property. My husband and I have been having “discussions” on whether we should cancel our education savings funds for our children and use them to invest in property. This is a bit of a hard one for me as I strongly believe in the funds we have set up with the view that regardless of what happens with us financially our childrens education will be paid for from year 8 to uni. I know that it is a security thing for me but I need some outside advice on this one. At the moment we are putting away $550/month for both children. In 10 years time we will get back $35,000 (our investment for child 1) and in 12 years we will get back $22,000 (our investment for child 2) with their educations being paid for on top of our investment (so basically it is enforced saving with the interest paying for the educations). My husband is leaning towards cancelling them completely and using the $550/mth to put towards deposits, whilst I am just so unsure of what to do. Please please please – I would be most appreciative of any advice you could offer or direct me somewhere that can perhaps enlighten us… Thank you to all in advance of ANY advice you may offer
My (ex)partner had the same scheme going for his two kids. I convinced him to kill that off, and cash in the money, as by investing it in shares and property we would get a much better return than what the education fudn would give us.
Lucky he did too, as kid 1 didn’t bother going on to Uni, and kid 2 has been a pain in the backside, and was recently shipped off to boarding school (although she ‘unshipped’ herself back home again, and he now has to pay $5K as a ‘termination fee’) which cost $5K per term, and I don’t believe was covered in the policy anyway.
So you’re putting away $6K per year for 12 years, and getting back $57K, plus interest to pay for schooling?
I would go with an IP, which in 10 years historically should double in value, so if you bought a $100K place, which the $550 + rental should easily service, you’ve got far more money than that being offered by the education fund. Plus you have the chance to leapfrog using that equity into a second property etc.
Cheers
MelAgree with comments by Mel.
The last point is very relevant, not only would you have the ability to use the funds against the equity from the increase in value (as long as servicebaility is OK), you still have the asset. No need to sell and therefore you still have the asset in your hands for future growth and further investing.
James
If you do it right with property, you don’t need any other kind of investment. Nothing gives the returns like intelligent property investment.
Funds generally invest in shares and the like. Having lost money in shares and futures when all the fundamentals were in my favour, I am so glad I found out about property investing. There’s a lot more that can be said, but basically if you buy positive cashflow property in areas of at least moderate civilization with strong rental demand you should be fine. Its very low risk in my view.
Thank you all for your advice – I think I know deep down that to invest in property is the right way to go – it’s just one of those learning things and a change of mindset!! and I truly do believe that ip is the way for us!!
Have a great weekend and enjoy…
Instead of putting $550 per month you can reduce it to say $250 per month and use the $300 per month left over to invest in property.
Currently I am doing the same putting some regular saving per month for my daughter, but at the same time I also invest in property.
Warm Regards
ChanDollars
[Keep going, you’re on your way to Frolic Freedom!]Hi Woodywhanau,
Very much also agree with Mel, another small pointer might be… if your kids know that you have funds being put away for their education, like Mel pointed out, they might not ever end up going to uni and that cash money saved and banked away, would have been better off invested….
though just be a little wary… if your kids do know you put money away and aside for their education, they might only attend uni, as they want to make you proud but also not disappoint you at the same time, if they didnt go to uni, because they maybe worried that, its hard to say no to attending uni, as you the parents set your hearts on putting a fund aside for their later education.
best to keep the money in an investment vehicle, but have it ready, for what ever choices your children choose, whether it be, uni, tafe, or starting their own business… their imagination can be endless….
Cheers,
sisthere was a recent report that the cost of education is increasing alot faster than inflation. a fund / savings plan like the ones on the market just wont cut it unfortunatley. like the others im with investing smartly and trying to get excellent returns rather than yr standard 5-7 pct.
cheers
Hi
I started putting aside money for the kids education into managed funds.
I stopped doing it. Fortunately I also bought a few investment properties and they have doubled in 4 years. So if the kids decide to go to Uni I can use the proceeds of one of these properties for their education. I am even going to cash in the funds and use that for our holidays later this year.
If we decide (they are only 3 and 4) we could possibly send them to a grammar school but I did ok with a Catholic secondary college so maybe I can use it for my retirement.
I like to think of it like this.
How much was a property worth 10 years ago and how much was your income then? Now see what a property is worth now and what your income is? If you use the $500 a month to retain that house you have more money working for you.
I have a friend considering the same. He has gone to a financial advisor for advice but I have intimated that your better off buying a property. But I dont really know how to broach the subject with him.
Property is your best investment in my opinion. Even if you only make inflation on it.
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