School’s out...forever!

If your kids are finishing high school and you’ve paid your final fees, it’s time to turn your attention to help securing your financial future.

If you have a child finishing high school this year, you could find yourself with a new spring in your step come January, particularly with private schools costing as much as $30,000 a year.1

And if you’re close to paying off your home loan you’ll start noticing even more of a difference to your bottom line.

It’s time to think seriously about how to use your newfound disposable income to secure your financial future.

One door closes, another one opens

A useful way to think about your personal finances is in terms of separate ‘cash buckets’.

For a long time, you’ve needed to allocate a substantial amount of cash to immediate priorities—buckets for today marked ‘school fees’ and ‘home loan repayments’.

But now you’ve got a bit more breathing space to think about tomorrow.

Perhaps you’ve already allocated some of your extra cash to go towards the buckets marked ‘new car’ or ‘overseas trip’.

But it’s also important to think about your future...and that of your kids.

No more empty nesters?

If you’re expecting some breathing space after the HSC, here’s the reality check. Expenses don’t necessarily end with the 18th birthday party.

So if you need quick access to your funds to help put the kids through uni, get on the property ladder or get hitched, you might want to look at investing outside super.

But super remains one of the most tax-effective ways to save so that you can maintain your lifestyle in retirement.

Super still the one

Any contributions to your super from your pre-tax salary up to $30,000 (or $35,000 if you’re over 49) are only taxed at the concessional rate of 15%2, which is lower than most people’s marginal tax rate. Any earnings are taxed at up to 15%. And any withdrawals are tax-free once you can access your super.

With the Government freezing your employer’s super guarantee contributions for seven financial years from 1 July 2014, you’ll need to take your own steps to boost your super in the lead-up to retirement.

But the good news is that limits on concessional contributions to super have been raised. So you can put even more of your pre-tax salary into super at the concessional rate of tax.

And in the lead-up to retirement, there’s even a way to start drawing on your savings while continuing to work and ramping up your super.

A Transition to Retirement strategy may allow you to maintain your work hours, potentially increase your salary sacrifice contributions to super and supplement your income with a TtR pension.

We can help

Call AMP Direct on 131 267 or contact your AMP financial adviser to work out the best way to achieve your new financial goals now the kids are finishing school.

Important Notice: Any advice in this article is general in nature and is provided by AMP Life Limited ABN 84079300379 AFSL 233671.The advice does not take into account the personal or financial needs, objectives or circumstances of any individual. This information should not be used instead of professional financial services and/or product, taxation or legal advice.

1 Source: AMP.NATSEM Income and Wealth Report: The cost of raising children in Australia, Issue 33, May 2013

2 Unless you earn over $300,000, in which case pre-tax contributions are taxed at 30% for any earnings over that amount.

What you need to know

Any advice on this page is general in nature and is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). The advice does not take into account your personal objectives, financial situation or needs. Therefore, before acting on this advice, you should consider the appropriateness of this advice having regard to those matters and consider the Product Disclosure Statement before making a decision about the product. AMP Life is part of the AMP group and can be contacted on 131 267. If you decide to purchase or vary a financial product, AMP Life and/or other companies within the AMP group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.