Assessment 3 – Statement of Advice (Report)

Assessment 3 (40%) – Statement of Advice (Report)

Objective: To formulate appropriate financial solutions tailored to a set of circumstances, goals and objectives.

You are to review the information provided in the case study and with the knowledge acquired in this unit, investigate various solutions to formulate a suitable plan to achieve the stated goals and objectives.

You have to use the format provided below (Guidance) to complete your Statement of Advice.

Case Background

Family: Tom (40), Sue (35), Mia (8), Ben (5)

Tom is a high school teacher, earning $90,000 per annum (before tax income excluding superannuation). Sue works as an accountant for a large accounting firm, earning $85,000 per annum (before tax income excluding superannuation). The couple has 2 children, a daughter aged 8 and a son aged 5. Their daughter (Mia) is a year 3 student, and their son (Ben) is a year 1 student. Both are in the same public school.

They are currently renting, paying a weekly rent of $550. They are planning to purchase a house with 4-bedrooms once Mia goes to high school (year 7) because they want to own a house to have more security and stability. The property they are looking for is worth about

$750,000 in today’s dollar, and they wish to pay at least 20% deposit as they don’t want to borrow too much.

They currently have $55,000 in their bank account (joint account). Sue also has 150 BHP shares that she bought on 6th Jan 2020 and 1,000 QANTAS shares that bought on 28th Feb 2020. Tom has a credit card with a $10,000 limit that he keeps for emergency use only. The family has 2 cars at present, one is a Ford Focus 2009 with an estimated value of $8,000, and another is a Mazda 3 with a market value of 20,000. Both cars were bought with cash. Tom has accumulated

$90,000 in his employer-sponsored superannuation fund, and Sue has $50,000. Excluding their rent, the annual expenses of the family are about $60,000 per year.

The clients seek your advice, looking to answer the following questions:

  1. How much do they need to save each month to save a 20% deposit, and can they afford to make a bigger deposit?
  2. Does Tom need to purchase life insurance to protect his family in the case of premature death? If so, how much? They wish to allow for:
    1. Funeral expenses: $10,000;
    2. Emergency funds:18,000;
  1. Enough money to clear their home loan;
  2. Financial support until Mia and Ben  turn 18, assume Mia and Ben need

$1,000/month each.

  1. Financial support for Mia and Ben’s education, assume it is estimated to be 350,000 in total.

Sue would continue working until age 67 in the case of the premature death of Tom.

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