Putting money away for your children into your mortgage

Press the play button to listen.

Transcript

Announcer: 96.5, we’re your family’s number one taking your requests this evening and it’s that time of the week we catch up with our lovely finance expert, Helen Baker from On Your Own Two Feet. Good evening, Helen.

Helen: Evening, how are you going?

Announcer: Good, thank you. Now we’re doing the whole kids, mortgages thing and tonight we’re going to talk about putting money away for the kids. If we’re thinking ahead and we’re planning ahead and we’ve thought actually we can do this, we’re going to start putting money away whether it be for university or to give to them later, you’ve got some tips on doing that.

Helen: Yes.

Announcer: Alright so how do we start with that?

Helen: Okay so most people will be putting money away for their children or their grandparents putting it away for their grandchildren and if you’re putting that say in a bank account or some sort of term deposit, currently, the rates are around 2-3% and obviously, any earnings on that money, you’re going to pay tax on.

So if you look at that versus, say, your mortgage, if you’ve still got a mortgage, let’s just say that interest rate on that mortgage is 6% and that’s not tax deductible. You might be better off putting money away for little Jack and little Jill away into your mortgage account, keep track of it because then you’re getting a 6% return without paying any taxes of 2 or 3% and paying tax. So you’re stretching your money, we’re all about stretching that money.

Announcer: Yeah that is an absolutely wonderful idea and something that you don’t really think of.

Helen: No and the other benefit for you as a parent is the interest that’s being charged on your mortgage will actually be on a lower amount because you’re going to have more money sitting in there to offset what the balance is so it helps you pay off that home loan quicker, allows you to pay less interest overall on your mortgage. So it seems to be a few tick boxes all around, really.

Announcer: Brilliant, planning ahead, keeping things down, it’s simple when you say it out loud, it’s simple. Thank you very much for that, Helen.

Helen: You’re very welcome, see you.

Announcer: If you want to find out more then make sure you check out the lovely Helen Baker at OnYourOwnTwoFeet.com.au.