How many of us with small children have wondered how they can safe guard their family’s financial future?
Ensuring you have enough money each week for the essentials can sometimes cause headaches for many parents, so trying to find funds for future investments seems almost like a pipe dream.
A very appealing pipe dream.
So how do families find the extra cash to put aside for their children’s future? And what is the smartest way to make your money grow to set your children up in the long run?
Contrary to many parent’s belief that they need to find big chunks of spare cash to invest, it’s all about putting aside small amounts and watching it grow in the long run, according to Australian finance commentator Noel Whittaker.
With small children, sometimes finding even the smallest amount of extra money every week can seem like a stretch, but starting slowly and being consistent is the key to watching your children’s investments grow.
While there are many options out there for parents who want to ensure the best financial head start for their children, Mr Whittaker has a few suggestions but says one of the simplest is to aim to pay your mortgage off early.
“Simply having a go at having your house paid off by the time your kids are in high school is going to give you an effective capital guaranteed return of around five or six per cent on the money invested in making extra repayments,” he says.
Using a loan repayment calculator can help you play with the amount you pay of each fortnight or month and plan your budget.
Another practical tip to achieve results when it comes to lowering your mortgage is to pay it off in fortnightly, rather than monthly instalments.
“You might pay $4000 a month, and move to paying $2000 a fortnight, so you’ll find yourself paying an extra $4000 a year without really feeling it as there are 26 fortnights a year, but only 12 calendar months in a year,” he says.
“So the easiest way is to ask the bank to take it out fortnightly, or alternatively accumulate all of that spare money in an offset account.