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Planning for the financial care of a special needs child

15 June 2021

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

Caring for a child with special needs can place an extra financial burden on families. We speak to CERTIFIED FINANCIAL PLANNER® Jane Campbell about some of the challenges and solutions families might consider.

As any parent will tell you, raising a child is an incredibly rewarding experience. But for parents of children with special needs, there is often the added challenge of extra expenses and reduced income.

Jane Campbell is a CERTIFIED FINANCIAL PLANNER® who specialises in providing financial advice for injured people and their families. She says it can be a challenge for parents to navigate the best path.

“In my experience parents do all they can, not only to meet their child’s expenses, but to save for the future. They worry greatly about what will happen if and when they can no longer keep up the pace,” she says.

The cost of childhood disability

There are more than 211,000 children in Australia under the age of 14 with a severe or profound disability (about 4.5 per cent). In total, around 357,000 children under-14 (7.7 per cent) have some level of disability.

Research shows the cost of raising a child with special needs increases in line with the level of disability. A 2012 study found it can cost up to three-times as much to raise a child with a severe intellectual disability, compared with a normally developing child.

In the same study, nearly 70 per cent of families reported losing income, or had to reduce their work hours, in order to provide care.

“Special needs often means less family income, but higher expenses,” Ms Campbell says. “Almost everything costs more, a suitable home, a modified vehicle, even education can cost more if it means specialist schooling, a tutor or teacher’s aide. Medical bills, treatments and equipment can also be very expensive.”

She says parents need to consider how they’ll get by while caring for their child, meeting extra expenses, and if possible, putting money aside to help cover their child’s future needs.

What financial support is available?

Fortunately, in Australia there is support available to help carers and their dependents. The National Disability Insurance Scheme (NDIS) provides funding for “reasonable and necessary supports” for people under-65 with a permanent and significant disability. This can help cover some of the expenses associated with caring for a special needs child.

The NDIS doesn’t provide income support, but there are government payments such as Carer’s Payment, Carer’s Allowance and the Disability Support Pension. You can find more information on what’s available and who is eligible by visiting Services Australia – People with disability.

Many charities also provide support, although it’s likely to be on an ad hoc basis. Fundraising through your local community or a crowdfunding websites is also a popular option.

Saving and investing for the future

Once parents have been able to save up some funds, or have received money as a gift or through fundraising efforts, what should they do with it?

Ms Campbell says ideally, funds can be held in such a way as to minimise tax and enable continued access to Centrelink. “You also want to have flexible access to and use of the funds, with low set up fees and ongoing costs,” she says.

Ms Campbell says some options include holding cash, investing in the parents’ name rather than the child, or considering the merits of establishing a trust. There are several types of trust that can be considered, including:

  • a family trust
  • a special disability trust (if the focus is on maintaining government benefits)
  • a charitable trust or necessitous circumstances trust
  • superannuation

Ultimately, it’s best to seek professional financial advice to help you navigate the best way forward.

“Every family’s situation will be different, so getting financial advice is particularly important.”

Read more: How to invest for your children’s future

What happens when I’m gone?

Many parents worry greatly about what will happen if they’re not around to care for their child. Ms Campbell says proper planning can help ease the burden.

“One of the biggest worries that parents of children with special needs have is, what if something happens to me?”

“In this context it can be hugely valuable, if confronting, to take the time to meet with a lawyer and document their wishes.”

An estate plan sets out what you’d like to happen to your assets and affairs when you pass away, or if you’re no longer able to manage your own affairs. It typically includes several documents that give instructions on how to distribute your financial assets; and who will have responsibility for the care of any dependents. This can include:

  • a will
  • total and permanent disability (TPD) and life insurance
  • superannuation death benefit nominations
  • powers of attorney and/or guardianship.

As inheritance matters can be complex, it’s important to seek legal and financial advice when drafting your estate plan. The right experts will be able to recommend the best approach for your family, to ensure your dependents are well cared for into the future.

Read more: Why you need a will

When to seek financial advice

Good financial advice can help you manage your cash flow, plan for the future and become more financially secure.

“No matter what your financial circumstances, there is some help at hand,” Ms Campbell says. “Speaking with a financial planner can make a huge positive difference for both the child and their parents.”

Financial planning professionals can help you put a financial plan in place, and advise you on the best investment, insurance and superannuation options to meet your needs.

When looking for a financial planner, make sure to ask about their experience advising people in your situation. Not all financial professionals will have specific knowledge about the issues involved in caring for a special needs child, or planning for their future.

It’s a good idea to ask around among family and friends for recommendations. You can also search for a CERTIFIED FINANCIAL PLANNER® professional using our Match My Planner tool.

Read more: What’s the difference between a financial planner and an accountant?