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Welcome to “Australia Explained,” an SBS audio podcast designed to guide you through life in Australia.

Navigating life in Australia can be expensive, particularly when you have children who depend on you financially. Many parents face the challenge of saving for their children’s future, whether it’s contributing to their first car, helping fund an overseas adventure after graduation, or setting aside money for a home deposit.

You’re listening to Australia Explained, an SBS audio podcast helping you navigate life in Australia.

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Life in Australia can be costly, and even more so if you have dependent children, especially if you are trying to save for their future financial security. This could mean helping them buy their first car, fund an overseas trip after graduation, or save money for a home deposit.

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You know, you could save a couple of thousand a year

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for a child, after 10 years, all the withdrawals that you make from that account are tax-free.

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This is Australia Explained podcast, and I’m your host, Maram Ismail. In this episode, you’ll discover the basics of financial planning for parents in Australia and why teaching your children financial literacy is just as important for their future.

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There are different reasons why you would put money aside for your child’s future. Although in many cultures children are expected to support their parents as they grow older, in Australia it’s also common for parents to help their children get started financially —for example, with their first car, university, or home. David Sharpe is the chair of the Financial Advice Association

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of Australia, a peak body for financial advisers, he outlines common expenses that parents can help their children with.

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Weddings, first car, and housing, and housing has become much more of a priority. If I went back 10 years, it was still weddings and cars. Nowadays it’s that getting people into a property, whether it be long term if they’re younger, or in the next couple of years. And with house prices and affordability.

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Being able to help their kids into a home is a major concern for a lot of parents.

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When it comes to buying a house. Some parents will help their kids cover the amount required for a deposit. Others may even choose to be a guarantor on their home loan. MoneySmart’s personal finance writer Shevaune Marchingo says there are some things to watch out for depending on how you decide to support.

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If you decide to give your child money to help, think about making a plan in writing to outline how much you gave them and how they will pay it back. Having this can also help to make it fair if you have more than one child, that you want to help financially. If you decide that you want to help by guaranteeing a loan for your child with a lender, we’d advise that you be very careful. If your child can’t pay the loan for any reason,

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you might have to pay it all back instead, so this is something to be really mindful of. So before you guarantee a loan, it’s important to consider getting financial advice from a licensed financial advisor.

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MoneySmart is a government website run by the Australian Securities and Investments Commission. It provides independent information to Australians about important financial

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decisions such as how to plan for your child’s financial security. Ms Marchingo, again.

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There’s two types of financial advice general advice, which doesn’t take into account your personal situation or goals, and personal advice, which is tailored to your financial situation and goals and also is in your best interests. So it’s important to decide which one you’re after.

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The next step is to find a licensed financial advisor and only deal with a licensed financial advisor. You can find this through MoneySmart’s financial advisor’s register.

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If you can’t afford private financial advice, free financial counsellors can also help you make a plan. You can find them through the National Debt Helpline or the Money.

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Smart website, regardless of what their savings goal is, Mr Sharp says parents should consider reducing their own debt first before trying to save separately for their children.

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One misconception around saving, you don’t have to do it separately. So if you’re starting out and you’ve just bought your own home for the first time.

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Maybe what you need to be doing is getting your own debt down and getting that, you know, creating capacity within your own loans, rather than just sitting outside and saving for your kids separately, because if you pay down your debt, well maybe you’ve then got the capacity to draw down debt later on to give to your kids. And so you’re saving interest as opposed to trying to earn it outside.

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There are various financial products for you to save for your children.

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Like savings accounts and the term deposits and long-term investment options, insurance bonds are another option for longer-term savings, Mr Sharpe says.

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There is another vehicle called an investment bond or sometimes called an insurance bond, and that is something that people have hoping to invest for a period of 10 years or longer. There are some significant tax benefits, so you know you could save a couple of $1000 a year for a child.

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After 10 years, all the withdrawals that you make from that account are tax-free.

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It’s important to note that there are also government and community programmes that can help families with saving goals, for example, matched savings initiatives or support payments through Centrelink to help with education or living costs. You can find more information about these on the Services Australia website.

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So how do you feel about dealing with money? According to MoneySmart estimates, 1 in 3 Australians finds managing their money stressful. For some, even having money conversations can be uncomfortable. Caroline Stewart is the CEO of Ecstra, a foundation that runs financial literacy programmes in Australian schools.

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She says it’s important for families to start money conversations as early as possible.

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So it sounds a bit crazy to be talking about money lessons even at preschool, but kids do understand the concept of needs and wants and things that they want to buy, even from a very early age.

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Involving your child in real-life situations can help.

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Understand basic money management concepts. Ms Stewart says.

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If you’re at the shops and your child is asking for something, there is a very simple life lesson to be learnt there by explaining why something costs what it does or getting them to simply compare the cost of two items and helping you make the choice together,

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Dr Bomikazi Zeka is an associate professor in finance and financial planning at the University of Canberra with expertise in financial education. She says even young children can learn to budget if you give them an age-appropriate examples like planning a birthday party or setting aside money for an emergency.

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It’s always good to save for a rainy day, but, you know, as a child, what exactly does that mean? And so, having those conversations from a household point of view, parents can start to socialise children around the reality of financial planning, including them in those conversations so that they see that, in fact, the bank of mom and dad is not some endless resource and that there is planning that is involved to make sure that things run successfully.

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Ultimately, involving your child in your family’s financial planning helps them become more confident and capable adults. Dr Zeka says.

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When we have these conversations quite early on, they become financially confident adults who can make the right decisions and assess the trade-off between risk and return. And at the end of the day, we also want to leave a financial legacy of financial literacy.

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So, remember, no matter your income or background, it’s never too early or too late to start talking about money and planning for the future together as a family. The information in this episode is general in nature. Seek professional advice before making a financial decision, and if you are in financial stress, call the National Debt Helpline on 1800 007007.

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Thank you for listening to this episode of Australia Explained, written and produced by Zoe Tomado, hosted, mixed and sound designed by me, Maram Ismail. Australia Explained managing editor is Roza Germian.

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This was an SBS audio podcast. For more Australia Explained stories, visit sbs.com.au/australiaexplained.

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Subscribe or follow the Australia Explained podcast for more valuable information and tips about settling into your new life in Australia. Do you have any questions or topic ideas? Send us an email to australiaexplained@sbs.com.au.