Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 313

The next generation and investment bonds

Australian parents and grandparents are overwhelmingly concerned for the next generation's financial future, with 96% fearing their children and grandchildren either will not be financially secure, able to afford a property or secure a good education in the years ahead.

Generation Life’s Saving for the Next Generation report surveyed over 1,000 grandparents and parents and found that over half of respondents (52%) worry their grandchildren and children won’t be able to afford to buy a property or live comfortably when they reach adulthood. Parents are also concerned a good education will be unaffordable for their children, a concern shared by grandparents.

Despite considering the financial well-being of the next generation a top priority, more than half of parents (53%) are not currently saving to support their children financially and two-thirds wished they had started earlier, by 10 years on average.

Only 15% of grandparents admitted they are saving for their grandchildren’s future, with half believing they should have started at least 12 years earlier.

A child's financial future is a broader family effort

There has been a structural shift over the last 20 years. The price of housing and education has accelerated so much that the average family has to consider how they will assist their children with these two large and expensive milestones. The median cost of a house in Sydney and Melbourne has gone past the million-dollar mark and a private school education can come close to half a million dollars.

Most parents are concerned they are not saving enough for their children’s future. Mothers are more likely to save for their children’s higher education or school fees, while fathers are more likely to save to transfer wealth. Nearly all respondents revealed that they want to pass on good financial knowledge to their kids.

Of the respondents that are currently saving for a child’s financial future, the majority of grandparents and parents are using cash and term deposits, followed by managed funds and property investments.

Deposit accounts are well understood, they are widely available and they are visible, next to people's everyday financials. They are also simple. People generally use deposit accounts in two ways: they set up an account in their child's name, or they set up a separate account in their own name and 'ring-fence' it for future spending.

Allowing time for investment bonds to work

When thinking about securing your child or grandchild's financial future, including big purchases such as houses or education, you have time for investment returns to work hard. That's where investment bonds can assist. They provide a wide range of investment options, with the advantage of a 30% tax rate for those on higher personal marginal tax rates. These benefits, compounded over time, can make thousands of dollars of difference.

Investment bonds have been around for almost 40 years. They were a more popular long-term savings vehicle until superannuation was introduced. However, investment bonds avoid the constant changes to superannuation that frustrate savers, with liquid and flexible alternatives and potential tax efficiencies.

Investment bonds can help in saving for retirement as there are no restrictions such as contribution caps, age limits or ‘work tests’. You can also access your funds before retirement age, with no restriction on how much you can access.

Three tips for parents and grandparents to save for the next generation are:

Start now. Saving early is the best way to harness the benefits of compounding. Starting small and saving regularly can turn $100 a week into more than $50,000 over 18 years. It's best to save in a fund that provides good long-term returns in a tax-effective environment with low fees.

Share your knowledge. Talking about saving with your children and grandchildren is a great way to educate them with good money habits that last a lifetime. Allow them to participate in family budgeting and spending. When they start earning their own income, use it as an opportunity to help them save and invest for themselves, choosing products that are suited to their needs.

Invest in growth assets. With house prices and school fees rising faster than inflation, savings must keep pace. Investing in growth assets like shares and property are a better choice than cash over time. For example, a balanced index fund through an investment bond is a good way to set and forget, keeping fees low.

 

Catherine van der Veen is CEO of Generation Life, a leading provider of investment bonds. This article is for general information only and does not consider the circumstances of any investor.

 

  •   3 July 2019
  • 3
  •      
  •   

RELATED ARTICLES

The gift of education and the cost of funding it

How to put money away regularly for your kids

banner

Most viewed in recent weeks

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Will you run out of money in retirement?

Fear of running out has become a defining retirement anxiety. Why do some retirees die with substantial wealth while others deplete their nest egg? Evidence suggests the answer is more complicated than we think. 

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

The investment that sidesteps the new tax traps

Tax rules have changed, but many investors are still using yesterday’s strategies. Insurance bonds may offer advantages for those seeking greater control, tax efficiency and certainty about their wealth.

Welcome to Firstlinks Edition 672 with weekend update

How does Australia measure up to the rest of the world?

  • 23 July 2026

Welcome to Firstlinks Edition 674 with weekend update

What begins as appetite, grows into excess and ultimately ends in spectacle. Millions of investors just discovered this the hard way.

  • 6 August 2026

Latest Updates

Retirement

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

SMSF strategies

Who really loses from the SMSF borrowing ban?

The ban on borrowing to buy residential property inside a self-managed super fund was framed as closing a loophole for the wealthy. Yet ATO data suggests its effects may be felt more heavily on members with moderate balances.

Investment strategies

The investing rule that explains the next market crash

What if investment success depends less on picking the right assets and more on understanding the decisions of other investors? A principle borrowed from game theory offers a different perspective on markets.

Investment strategies

Gold: should you own the metal or the miners?

Gold is back in the headlines but investors may be asking the wrong question. Before deciding where prices are headed next, it's worth considering whether the investment you choose will deliver the outcome you're actually seeking.

Fixed interest

Global bonds markets are hiccupping

For decades, investors looked the other way as government debt ballooned. But a reckoning may be beginning. Bond markets are stirring and the consequences could reach far beyond markets into everyday life.

Property

Why investors are looking beyond traditional property sectors

A little-known corner of the property market may be quietly benefiting from powerful demographic and healthcare trends. Could this specialised sector offer investors something increasingly difficult to find: enduring demand?

Retirement

Retirement in reality - 6 months in

Is retirement really an identity crisis, or is something else at play? New insights challenge conventional thinking and reveal why some retirees struggle to fully embrace life after work.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.