Family with Kids Finance Guide
Managing a mortgage while raising children means balancing competing priorities: paying down the loan, building savings, covering insurance, managing education costs and keeping the household budget under control. A well-structured home loan with an offset account can be the foundation of that balance.
By Better Rate Mate Editorial Team · Last reviewed
1Key financial priorities
Use an offset account as your emergency fund
Money in a 100% offset account reduces the interest charged on your loan while staying available. Moneysmart says an offset may be worth it if you have a large loan, keep a regular savings balance and want flexible access to your money. See offset accounts.
Review your insurance as your family grows
Each new child adds to what your family would need if you couldn't earn. Review life, TPD and income protection cover so it reflects your mortgage and the years until your children are independent.
Plan for education costs early
School costs vary widely, from fees to uniforms, camps and devices. If you plan on private schooling, build the fees into your long-term budget.
Plan for one-income periods
Parental leave, paid or unpaid, reduces household income for a while. Check that the repayments work on one income, or build a buffer of several months' repayments in your offset account before the leave starts.
2Loan types to consider at this stage
Variable rate with 100% offset
Suits family budgetsPark your pay and savings in the offset account between pay cycles. Every dollar in it reduces the balance your daily interest is calculated on, and the money stays available.
Fixed rate portion
For certaintyFixing part of the loan gives predictable repayments during tight periods such as parental leave, while the variable part keeps extra repayments and the offset.
Home equity line of credit
Use with disciplineIf you have significant equity, a line of credit can fund renovations at home loan rates rather than personal loan rates. It takes discipline to avoid spending equity on things that don't last.
3Insurance needs at this stage
- ✓Life insurance sized to cover the mortgage and your family's living costs
- ✓Income protection for both income earners in the household
- ✓TPD insurance, particularly for the main income earner
- ✓Private health insurance with family hospital cover; compare premiums, as they vary
- ✓Home and contents insurance at replacement value, updated after renovations or major purchases
4Common mistakes to avoid
- ✗Refinancing into a new 30-year term after years of repayments, which restarts the interest clock
- ✗Treating the offset account as a spending account rather than a buffer
- ✗Not increasing life insurance cover as the family grows
- ✗Not comparing health insurance every year or two as your needs and premiums change
- ✗Putting school costs on high-rate credit instead of planning for them
5Tips for getting a better rate
- 1Ask for a rate review as your balance and LVR fall
- 2Compare energy providers each year
- 3Check whether bundling insurance policies with one provider earns a multi-policy discount
- 4Check whether a package loan saves more than it costs: divide the annual fee by your balance to see the rate discount you need
- 5Put tax refunds into the offset account or extra repayments
Common questions
Is an offset account worth it for a family?
Often, if you keep a regular balance in it. Moneysmart says an offset may be worth it if you have a large loan, keep a regular savings balance and want flexible access to your money; it may not be if your balance is usually low and the offset loan costs more.
Should we fix part of our home loan?
A split loan fixes part of the balance for certainty and leaves the rest variable for extra repayments and an offset. It suits families who want predictable repayments during tight periods without giving up all flexibility. This is general information, not advice.
Can a parent be a guarantor on our home loan?
Many lenders accept a family guarantee, though not all: Unloan, for example, doesn't accept security guarantors. The guarantor's property secures part of your loan, so it is at risk if you can't pay.
