After the excitement of finishing their exams and taking part in end-of-year celebrations, many of our kids will face the big question — where to after high school?
While some will enter the workforce, an increasing number of students are heading off to university or TAFE.
According to the latest AMP.NATSEM Income and Wealth Report Smart Australians, education levels are on the rise with over four in 10 young adults completing some form of tertiary education.
It's clear from the new research that education pays off in future earnings. A person with a Postgraduate Degree will earn more than $3.17 million over their lifetime, while a person with Year 11 or less education will have an income of just $1.74 million.
While there are long-term gains, the cost of tertiary education can inflict short-term pain on a tight family budget. With many university degrees now costing tens of thousands of dollars, there are big financial implications for both parents and students.
Tips for surviving tertiary education:
The value of an education
Talk to your children about how a tertiary education can dramatically improve their employment prospects and future earnings. While it might be tempting for them to take a full-time job and start earning money straight away, it may not pay off in the long-term.
A HECS upon you
Many students cover the cost of tertiary fees by taking out a low interest loan under the Federal Government's HECS-HELP program. Both parents and students should ensure they fully understand how the scheme works. There are discounts for paying all or a portion of the fees up front.
Leaving the nest
Another big decision students face is whether they will stay living at home with their parents or move out on their own. While the idea of leaving the nest may sound exciting, it's important to weigh up whether the increased freedom is worth the added burden of much higher living costs.
Paying their own way
If adult children are living at home while studying, it's reasonable to expect them to contribute to household expenses by paying 'board'. It's also fine to ask them to cover the cost of their own car and petrol, outings and clothes. Encourage them to work part-time and on their holidays so they can be as financially independent as possible.
Don't forget your own financial security
Before deciding what level of support you can offer your children while they're studying, speak to a financial planner about what shape you're in for retirement. It's great to give the children a good start in life, but this won't be possible if your finances aren't in tip-top shape.
Tips for students
Whether or not they're living with their parents, it's important for students to create a budget as early as possible. By establishing good money habits, they'll be in a better position to pay off their HECS-HELP debt quickly.
Dianne Charman is an AMP financial planner and mother of two.
Dianne Charman is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706. Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.
To find your nearest AMP financial planner visit www.amp.com.au/findaplanner.