Sometimes it takes a shock to focus the mind, and when it comes to money and investments, it’s rarely a good shock.
The Christmas credit card statement springs to mind, or the realisation of just how much you are going to need for school fees before you need it. Whether you are considering private or public education for your children – the costs are substantial. According to a recent survey conducted by education loans provider ASG, the average cost of putting a child through a private school in a capital city can be as much as $550,000. And public school costs have risen substantially as well – up to $75,000. That’s quite a bit for ‘free’ education.
At moments like these, we are reminded all too strongly of the benefits of investing – and the value of a regular, structured and tax-effective investment plan.
Investment bonds – the flexible, tax-effective way to invest
Investment bonds offer an excellent, set-and-forget long-term investment plan and their tax-effective structure makes them an excellent way of achieving your financial goals. Whether your goal is to fund education, a pre-retirement nest egg, a mature-age gap year or a lump sum for your children for their first car, gap year travel or a deposit on a home, investment bonds could fit the bill.
Why are investment bonds tax-effective?
Investment bonds are in reality a life insurance policy with a life insured and a beneficiary, but in reality operate like a tax-paid managed fund, with an underlying portfolio of investments. The maximum amount of tax paid within an investment bond is the company tax rate of 30%, which makes them especially attractive for people on more than $80,000 per annum. No personal tax is paid if the funds are not accessed for 10 years, providing a further incentive to keep your savings intact. And so long as you stick to the rules, no tax reporting is required at all.
You can also access our Savings calculator, which helps you to work out how much you will need to save and invest to reach a specific goal. Then there is a dedicated Cost of Education calculator to find out how much you will need to pay for your children’s education and to help you structure your investment.
An initial investment of as little as $500, and the flexibility to make regular contributions
You can start a Centuria Investment bond with a one-off investment of just $500 and make regular contributions of up to 125% of the previous year’s contribution, or from as little as $100 per month to maximise the compounding benefits of regular investing. Centuria investment bonds also offer a range of investment options so you can match the assets in the fund to your own investor profile. You can also switch between options without cost or penalty.
Investment Bonds are also flexible in that your funds can be accessed at any time, albeit with some potential tax consequences depending on when you withdraw the funds. Their simplicity and tax-effective nature also make them ideal vehicles for estate planning, tax planning, as an adjunct to superannuation and even to manage aged care fees.
Investment bonds are a great teaching tool for children – they demonstrate clearly the benefits of long-term saving and investing. Investment bonds can be held in the name of a child, and you could consider funneling part of their pocket or birthday money into an investment bond, perhaps matching it dollar-for-dollar to encourage the investing habit.
If you would like to understand more about the benefits of investment bonds, including their use in estate planning as well as long-term investing, please contact Centuria on 1300 505 050.