Investing for kids – ways to save for their future

Whether you’re thinking about education, the current cost of living or the future, saving even a bit now could make a big difference later on.

We all want the best for the children in our life, whether we’re their parent, grandparent or godparent. And, while money won’t be the be all and end all, you’d probably agree some extra dough wouldn’t go astray, particularly when considering things like education and the cost of living in Australia.

In fact, out of a survey of more than 1,000 Aussie parents, more than half said they had already set up a savings account for their kids’ future, albeit four in 10 of those parents also admitted to having to dip into those funds occasionally to make ends meet1.

With that in mind, you might be thinking about some ways you could invest and save for your kid’s future, bearing in mind there are risks attached to investing, as returns aren’t always guaranteed.

Where you could put your money

If you’re thinking about putting money aside, so you can potentially do more for your kids financially, an AMP Growth Bond (also known as an investment or insurance bond) may have some benefits.

If you’re wondering how it works, an AMP Growth Bond is a type of investment-savings plan, and because earnings are taxed within the bond at 30%, they’re considered ‘tax-paid’ investments.

This means you don’t have to worry about including the earnings you’ve made in your tax return, and if you pay a higher rate of tax on your income, it could be a tax-effective way to invest and save.

An AMP Growth Bond will often suit long-term investors because it is typically designed to be held for at least 10 years, and while you can access your money before that, there can be tax implications.

How an AMP Growth Bond could help

You can start up an AMP Growth Bond with as little as $1,200 or just $100 per month by setting up a regular investment plan.

Meanwhile, some of the features of an AMP Growth Bond, which may be of benefit if you’re investing with a child in mind, include the following:

You can transfer the growth bond to the child at a certain age

Once your child reaches a nominated age (between 10 and 25), an AMP Growth Bond can be easily transferred into their name, without them having to pay capital gains tax, stamp duty, or any additional fees and charges.

This option is available to anyone wanting to invest on behalf of a child under the age of 16, including parents, grandparents and family friends.

You have the ability to nominate up to four beneficiaries

Another feature of the AMP Growth Bond is the ability to nominate up to four beneficiaries, who’ll receive the proceeds of the investment bond, tax free, should you pass away.

As this creates estate planning opportunities, it’s why some people might see the AMP Growth Bond as a type of life insurance policy and why some people may refer to them as insurance bonds.

You could potentially pay less in tax that what you would on your income

Because earnings are taxed within the bond at 30%, an AMP Growth Bond is considered a ‘tax-paid’ investment, which means you don’t have to worry about including earnings you’ve made at tax time.

On top of that, if you pay substantially more than 30% in income tax, the AMP Growth Bond could be a tax-effective way to invest and save.

If you hold onto an AMP Growth Bond for at least 10 years, you also won’t have to pay additional tax on any investment earnings when you make a withdrawal from the bond.

You can access your growth bond anywhere online

You can access and manage your AMP Growth Bond, as well as check out any previous contributions you’ve made, at any time, by registering or logging into My AMP.

Weighing up the pros and cons

With an AMP Growth Bond, your money is pooled with money from other investors, with an investment manager making the day-to-day investment decisions. For more insights, check out our article - The pros and cons of investment bonds.

Meanwhile, saving for your child’s future will depend on a variety of factors, so you might also want to keep in mind the following things when considering your options: 

  • How easy it is to access your funds
  • How often contributions may need to be made
  • When fees might be payable
  • What investment options are available and how they vary
  • What level of risk you might be taking on and how comfortable you feel about it
  • Whether there are any legal and tax implications worth knowing upfront.

Other things to think about

Helping your kids is important but so will ensuring your own dreams and goals don’t fall by the wayside, particularly if you’re helping out older members of your family at the same time.

You could have other debts that may be worth paying off first, such as your mortgage, or there may be greater tax advantages to putting money away for your retirement.

Where to go for assistance

If you’d like to know more about your options and where advantages and disadvantages may arise, speak to your financial adviser. And, if you don’t have one, contact us on 131 267 or use our find an adviser search engine

For more information, check out the AMP Growth Bond product page on our website, where you can also submit an application.

1 Mozo - Cradle Raiders: Aussie parents take $1.3 billion from savings accounts set up for kids

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Important information

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This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

The issuer of the AMP Growth Bond is AMP Life Limited ABN 84 079 300 379. AMP Life is part of the AMP group and can be contacted on 131 267 or askamp@amp.com.au.

Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.