While a joyous and wonderful time, having a baby can take a chunk out of the family coffers while one parent (usually Mum) takes time off work to look after the child.
On January 1, 2011 Australia joins the vast majority of the western world when it introduces paid parental leave for children born or adopted on or after January 1, 2011. The scheme will pay the primary carer the equivalent of the Federal Minimum Wage (currently $569.60 per week before tax) for 18 weeks. This is as long as the primary carer satisfies the eligibility requirements of the scheme, including that their annual taxable income does not exceed $150,000.
The Government’s scheme will also be in addition to whatever the person’s employer pays for paid maternity leave.
So how can the Paid Parental Leave program save money off the mortgage?
If you’ve planned for baby, have squirreled away as much as cash as possible and can still meet all the necessary financial requirements, why not look at the Parental Leave payment as an extra payment off the mortgage.
On an average $300,000 mortgage taken over 25 years with an interest rate of 7.25 per cent, you could potentially save thousands of dollars in interest as well as reduce the live of the loan, if you put the Parental Leave payments straight on the home loan.
Additional payments can be made to some, but not all, loans, so review your personal situation to check if this is possible.
Aussie’s founder and executive chairman John Symond said it’s understandable that families need every cent they can get when baby arrives. In the long run, paying the mortgage off faster helps everyone.
“This new scheme is really a great way of getting the government to give families a helping hand,” he said. “And while the cash is nice, why not make it work harder for you by paying it off the mortgage and in turn saving you nearly three times as much in the long run.”