Australian parents are anxious about their kids’ financial futures
Cash and term deposits are the main way parents are saving for their kids, despite the low return on investment.
A new report released by Generation Life, a leading provider of investment bonds, reveals 96% of Australian parents and grandparents are concerned about the financial future of their children and grandchildren. Of the most concern is their child's ability to afford a property, afford a good education as well as concern for their general financial security.
In order to save for their children, 59% of Australian parents are using cash (for example savings accounts) and term deposits. However, Australian grandparents are saving a little differently. While nearly half (48%) of grandparents are using cash and term deposits to save for their grand kids, 14% are also using managed funds and 12% are using property investments.
Cash and term deposits are a great way to save as they offer a safe and predictable return on your money. However, in today's low-rate environment most savings accounts won't offer more than 3% interest on your balance, with term deposits offering a similar rate.
Joint CEO of Generation Life Catherine van der Veen. said, "More than ever, the next generation are going to need help to pay for their education and to get into a house. With the median property in Sydney now surpassing one million dollars, parents and grandparents are stepping in to help with one third of parents saving towards a first property for their children."
Joint CEO Lucy Foster said parents might be overlooking bonds as a savings strategy. "For the half of Aussies using cash to save, this could be an ineffective way of trying to reach their long term financial goals – there are better ways to make money work harder. We know baby boomers in particular are looking for smart ways to make the most of their money, but our research indicates one third of Australians have never heard of investment bonds."
Generation Life has lunched a new product called ChildBuilder, which is an investment bond designed for children. "There seems to be a misconception that investment bonds aren't an affordable option, but we're finding as people learn about the benefits, they are growing in popularity. The research indicates there's still quite a knowledge gap, as more than half of Australians are unaware of how investment bonds can remove the complexity that comes with managing your financial needs."