Mums Finance

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Well, that’s what women in Australia are doing right now - or will be doing in a few months time anyway. Back in 2004 the Liberal Govt decided that the birthrate was too low to sustain a working population in 30 years time  (I am not too sure about that one; Australia seems to have plenty of kids to me).

The then Federal Treasurer, Peter Costello, urged Australian couples to have ‘ one baby for your husband, one for your wife and one for the country’. From the 1st July 2004 each couple was paid a lump sum amount of $3000 for each child born; the amount has since risen to it’s current payment of $4000 per child born and after July the amount will increase to $5000. Of course you can imagine how this went over - extremely well.

The lump sum payment is intended to ease the initial costs of having a baby in the first weeks and months but, of course, many parents have not exactly spent the small fortune on the child - in fact it has been acknowledged that the sale of luxury items such as plasma TV’s went through the roof after the introduction of this windfall. You can just imagine. And also there is the other side of the coin…the Govt has been criticised for encouraging teenage females to fall pregnant in order to get the cash; this in fact has been happening as it was only too obvious that it would. The Govt now has determined to pay mothers, 18 years and under, the lump sum in fortnightly instalments to take the temptation out of the equation.

There is currently a heated debate raging around this entire issue. Should the cash payment instead be converted to food vouchers; utility vouchers and possibly investment incentives in order to stop greedy parents spending the money on themselves rather than the child itself. And do not forget it will soon be five thousand dollars - have a baby each year and you really start to profit. As a good number of single females have chosen to do…

Drug addicted mothers too have been found to be buying drugs with the cash; alcoholic parents are drinking the money rather than buying food and clothing for the baby - handing such a large sum of instant cash to people who are not in the position to be responsible with it really has just exacerbated these already common social ill’s.

Personally I think it is a ridiculous amount of cash to pay out for one baby; it should be ‘capped’ for sure i.e. no more payments after the second claim; not too long ago the third prize in the NSW State Lottery was $5000 if that puts it into perspective. That’s an awful lot of third prize lottery winners! the thing is millions of parents, like myself, managed pre-2004 to raise our kids without this much money being thrown at us all at once - and that also mean’t we didn’t have the luxury shopping sprees that new Mum’s now have when they get out of hospital.

But the new Labour Govt, while it decides how to best deal with the future handling of this payment and will hardly scrap it (it’s one hell of a vote winner), it must come up with a better scheme to ensure that those babies born end up benefiting from the allowance…rather than the proprietors of electrical goods stores and Gucci boutiques.

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Many grandparents like to establish a small trust fund for their wee grandchildren and that’s wonderful. But doing so these days can be a bit confusing given the number of options available. I have a suggestion that might be the one you are looking for, especially if you like the idea of a passbook rather than a card/statement account. They are so impersonal aren’t they?

Pop along to your local post office and ask to open a National Savings and Investment Account (NS&I). All you need to do so is £20 and you can ask to be issued with a passbook (remember those?) . Many people, like my Mum…and me even, like the old ‘book’ because we can see our balance in writing.

And as children don’t pay tax then effectively the account is tax-free. There are post offices everywhere and they are guaranteed safe.

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Our parents and grandparents were great at saving what little money they were able to hang onto years ago; these days it is not so easy to put a bit aside for any reason let alone building up some savings for the kids. But with some thought and committment you can set aside some money as watch it grow - it will make a great gift for the when they come of age. And we all know how quickly that comes long!

* Make use of that free cash from the Government

If your child was lucky to be born after 1 September 2002 and is entitled to Child Benefit then they’re also entitled to a voucher - a Child Trust Fund voucher - of £250 at birth plus a £250 top-up at seven, both double if you’re on a low income. In the bigger scheme of things I know it’s not much but it’s a start and often that’s all you need to get onto that road to that nice nest egg.

The route to that nest egg really begins with the fact that once invested - and you’ve got to choose the stocks and shares option for this - you and your family can top up the account to the tune of £1,200 a year, returns are tax-free and the kid can’t touch it till they’re 18. Arm yourself with a good Broker for this task, there are plenty around. Child Benefit, if you can afford to invest it, is nearly £1,000 a year. Do all this and, assuming a roughly achievable annual return of 6%, after a mere 6,570 days (18 years), your child has £40,025.57 !

Remember, we are talking about looking to the long term here - nothing happens overnight as we all know.

Popularity: 9% [?]