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

Submission: Via Turnitin, with a front cover that includes your name and student ID

Due Date: Tuesday, 3rd  June, 17:00 AWST

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

Instructions:

Review the information provided in the case study along with the knowledge acquired in this unit, and conduct additional research to investigate various solutions to formulate a suitable plan for achieving the stated goals and objectives as outlined in the case background.

Use the format provided below (Guidance) to complete your Statement of Advice.

Clearly state all assumptions and sources of information, including but not limited to interest rates, tax rates, inflation rates, growth rates, etc. All research is to be included in the appendix (screenshots are permitted).

While specific product recommendations are not required, you may reference examples encountered during your research in your analysis.

The maximum number of pages for this assessment is 10 (including the front cover but excluding any appendices). Please refer to the guidance notes for a detailed breakdown.

Suggested Research Sources:

Moneysmart website:https://moneysmart.gov.au/

Major bank websites: For checking borrowing capacity and upfront costs associated with home purchase.

Major insurance company websites:  For insurance premium quotes based on your calculated cover amount needed.

Textbook/learning materials

Case Background

Family: Michael (35), Sarah (33), Daniel (3)

Michael  is  a  civil  engineer  earning   $95,000  per  annum  (before  tax  and  excluding superannuation). Sarah works part-time (3 days a week) as a marketing coordinator for a retail company, earning $40,000 per annum (before tax and excluding superannuation). Their son, Daniel, is 3 years old and attends childcare while Sarah is at work.

The family currently rents a townhouse, paying a weekly rent of $600. They plan to buy a family home in 6 years for long-term stability. The property they are considering is currently valued  at  approximately  $600,000.  They  aim  to  make  a  20%  deposit  to  avoid  Lender’s Mortgage Insurance and reduce their mortgage burden but are concerned about affordability in 6 years, given potential increases in property prices.

They currently have $60,000 in their joint savings account. Michael also owns 200 CBA shares, purchased on  10th  October 2024 for $136.19 per share. Michael has a credit card with a $12,000 limit, used occasionally for travel and emergencies, with no outstanding balance. The family owns two cars: a Toyota Corolla 2012 with an estimated value of $10,000 and a Hyundai Tucson 2018 valued at $25,000. Both were purchased with cash. Michael has accumulated $50,000 in his employer-sponsored superannuation fund, and Sarah has $30,000. Excluding rent, the family’s annual expenses amount to approximately $55,000.

The clients seek advice on the following matters:

1.   How much do they need to save each month to accumulate a 20% deposit, and can they afford to save more?

2.   What will their cash flow statement look like once they purchase their new home?

3.   Should  Michael  purchase  life  insurance  to  protect  his  family  in  the  event  of his premature death? If so, how much and what type? They wish to cover:

o  Funeral expenses: $12,000;

o  Emergency funds: $30,000;

o  Enough money to clear their home loan;

o  Financial support until Daniel turns 18, assuming he needs $1,200/month;

o  Financial support for Daniel’s education, estimated to be $120,000 in total.

Sarah would continue working until age 67 if Michael were to pass away prematurely.

Guidance for report