Here’s one that comes up all the time.  Most of us, myself included, want the best possible for their kids.  However, this has changed a lot over the past 50 or so years.  Thinking of my parents generation, and the one before that, opportunity and expectation were very different.  Previously, it was about providing a safe and secure house, teaching manners and gratitude and ensuring that your kids got a good education with the chance at university.  It was about trying to improve upon every little thing by a little bit each time.

As a parent, I look around and I see a world that’s very different.  In the board room as a financial planner, I get to look behind the façade and find out what’s really happening.  Essentially, the playing fields have been levelled.  Everyone can get a good education, the threat of being poor isn’t biting at most people’s heels, in fact, there is a level of competition out there that has never previously existed.  The competition is for everything – that coveted spot at the right uni, the right internship, job, the right crowd.

In the heat of competition, decisions are made and consequences are considered later.  While I’m not saying that you should hold back and not spend anything on your children, I am saying that understanding the consequences and striving for value in what you spend is important.  One of the areas that often come up is paying for children’s university fees.  The options are to either use HECS-HELP, or to pay upfront.  Most people I meet often don’t want their kids to enter into their working lives with an education debt hanging over their heads.  You could be paying between $30,000 to $100,000 for your child’s university education.  Why is this different to the private school vs public school debate?  It’s different in that you HAVE to pay for private schools if you want them, there is no other option.  For university, you can choose to pay now or later, but everyone gets the same education.  Here is how I see it.

You’re 50 when your child getting into university.  You take out an extra $60,000 from the mortgage and buy yourself a $450,000 investment property.  In 15 years, assuming that the property only goes up with inflation and over that period of time it produces no income over it’s cost, it’s going to be worth $701,000.  That’s a $251,000 profit over 15 years.  Now, I’m being assumptive that property will match inflation, however I think that’s a fair statement.  I personally expect it to do a lot more than that, but I’m keeping it conservative.  So, what I’m saying is that paying for your children’s could cost you $251,000, not the just the $60,000 I used in the example above.

Imagine being able to just write a $100,000 chequer to your kids in 15 years time and still know that you’re up.  It’s going to help a lot more than making sure that they don’t leave university with a HECS-HELP debt.  Think about it.  It’s great to be able to say that you paid for your kids university fees, but I can assure you that it’s even better having a bigger bank balance.