Having two young boys myself I am fully aware of the calls on the time of parents. The school runs, sports clubs, ferrying them from A to B or just sitting them down to complete their homework all takes time, leaving very little for other important things, including what we rather grandly call ‘financial planning’.
I’ve therefore put together a few quick financial hints and tips for parents. They are all pretty common sense, but I can almost guarantee that no parents reading the list will have done everything on it; if nothing else hopefully this article will act as a useful reminder of the sorts of things parents should consider.
Bev Stoves, Independent Financial Adviser
Contact Bev today:
0115 933 8433
bev.stoves@investmentsense.co.uk
Tip 1: Make a will
This is the ultimate in “I haven’t got round to it” jobs.
We all know it’s important to make a will; it’s the only way of ensuring that your assets are distributed on your death in accordance with your wishes and that your children are cared for by the people you choose.
If you do nothing else after reading this article make an appointment with a solicitor to arrange a will, it’s never nice to think about your own death, but if the worst happens your children will be very grateful you took the time to make a will.
Whilst you are at it, make sure that you have nominated beneficiaries for any lump sum death benefits that your estate might be entitled to in your death, for example if you are a member of your employer’s Occupational Pension Scheme.
Tip 2: Save for your child’s future
Easier said than done in today’s financial climate, but the calls on your savings will only get louder as your child grows up.
School and university fees, a deposit for their first house, weddings, you name it, they all have to be paid for and meeting the cost out of income isn’t easy.
I’d suggest you start saving as soon as you can; even a relatively modest amount will make a difference to your child’s future.
Tip 3: Tax free savings
If you plan to save into deposit accounts, rather than investing, make sure you do so tax efficiently, for most of us that means using ISAs (Individual Savings Accounts).
Adults can save into Cash ISAs, whilst children under the age of 16 can open Junior ISAs which can receive contributions from themselves, parents or grandparents.
A word of warning though, at the age of 18 Junior ISAs become ‘Adult’ ISAs, with the savings accessible to your children. For some children this might be acceptable, for others, who might not be so financially savvy it might not be such a good idea!
Tip 4: Consider investing
If you want to take no capital risk with the money you put aside for your children, then saving into deposit accounts is the only option. However, this leaves you open to the risk that inflation will erode the buying power of your savings.
Put simply, if you have say £10,000 put aside for your child, and during a year you get 3% interest, the face value at the end of the year will be £10,300. But if inflation is running at 4%, the buying power will actually be less than the original £10,000, meaning in real terms you have lost money.
Investing carries its own risks, the value of your capital will rise and fall for example, but over the longer term you can expect investing to produce better returns than saving. Clearly this is in no way guaranteed and you might need to be prepared for a bumpy ride along the way!
For most people a combination of saving and investing works best, but it really is down to your individual circumstances.
Tip 5: Make sure the “what if” is covered”
Thinking about being ill, or even worse dying, can be an upsetting subject, but unfortunately it does happen.
Think for a moment about what if you died or had a serious illness, how would impact financially on your children. It is likely have a significant effect and could potentially mean fewer opportunities for them in life.
It doesn’t cost much to protect your family from the financial impact of you or your partner becoming ill or dying, but it’s very much like making a will, many of us just don’t get round to it.
Most of us can afford to make some provision because Life Cover and Critical Illness Cover are relatively cheap. Look at it this way, if you had a 1% or 2% pay cut, it might be annoying but would you be able to cope? If the answer is “Yes” then that’s probably all it takes to start putting some protection in place.
Tip 6: Financial education
We recently met Chris Leslie, our local MP and Shadow Financial Secretary to the Treasury; one of the things we talked about was the need for more financial education in schools.
We find it shocking that most schools don’t provide personal finance education to our children. It is therefore down to parents to teach their children the basics about money, from mortgages to savings, investing to pensions, it is vital that your children learn how money works.
We’d like to do our bit and would happily spend time with the children of our clients teaching them a little about personal finance, but we can only do so much, until schools pick up the baton it is mostly down to you as parents to provide financial education for your children.
Next steps
How did you do? A tick next to every tip?
No, I thought not, but that’s fine, it puts you in the vast majority of parents who have just not had time, or in some instances the means, to do everything you can.
As the saying goes Rome wasn’t built in a day, so I’d suggest picking just a couple of the tips and putting them in place; by doing this you will be making a start towards providing a better financial future for your children.
We are of course here to help. If you would like our assistance in putting any of the tips into action do not hesitate to contact me on 0115 933 8433, or email me at bev.stoves@investmentsense.co.uk
Note: The Financial Services Authority does not regulate Will writing
