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Point of View

Financial planning when you have a young family

By Lisa Lloyd, Wealth Planner 

 

When you have a family, everything changes – but I’m sure you don’t need me to tell you that. One thing for certain though, is that having dependants makes it even more important to make a financial plan, even if it doesn’t feel like a top priority right now. Financial plans will help to you feel confident that your day-to-day expenses are covered, and that you’re well positioned for the future – whatever that may bring. 
 
Here are some of the things you need to consider if you want to meet your short, medium, and long-term family goals:

Financial security, come what may

It is important to ensure continued financial security for your family in the event of a life-changing event, such as long-term illness, injury, or if one of you prematurely dies. Often clients think this is just about protecting your income, and of course that it is part of it, but it can also be about ensuring that you can afford extra childcare if the main carer is incapacitated.

Saving for large unplanned expenses

There are times in your life when you have large one-off expenses. Before having a family, it’s probably relatively easy to absorb those costs – especially if both of you work and have sufficient monthly disposable income.  Once you start thinking about a family, you need to begin planning for such expenses so that you don’t have any nasty surprises. Your savings will need to grow faster than the rate of inflation, which is not easy in today’s low return environment, so planning ahead is key.

Maximising your mortgage potential

Getting a new mortgage is becoming harder and harder. Lenders are scrutinising even the smallest of expenses, and any debt could hamper your ability to borrow. If you’re thinking of taking out a new mortgage in the future, make sure your finances are in order and check your credit rating for any unexpected surprises.

The cost of education

If you plan to send your children to private school, or if you think you might want to fund higher education in the future, the sooner that you start planning for it the better. School fees are a huge undertaking, which may be fine when you are both of you are in employment however if one of you needs to take a career gap, perhaps due to having another child it can add to the financial strain. It’s a good idea to ensure you can fulfil these financial commitments, well in advance of when you need to start paying for them. By doing so you’ll ensure that they’re affordable for the duration of your children’s education. 

Thinking about retirement

When you’re knee-deep in nappies, or school homework, the last thing on your mind is retirement. But the sooner you start planning for it, the better. If you leave it until you are older, at best it could mean one or two fewer holidays a year, at worst it could mean working long into retirement, or adjusting to a less comfortable lifestyle. A review of your long-term savings and investment strategy would ensure you are taking maximum advantage of any pension facilities and contributions offered by your employers, as well as maximising the personal tax advantages offered to you through pension schemes.

Being tax efficient

A review of how your finances are structured would be a worthwhile exercise – especially if one of you is not working, or under the 40% tax threshold, while the other is a higher-rate tax payer. You should also start planning for inheritance tax purposes and having a will drafted, especially once you have dependants.

In summary…

It can pay dividends to hire a professional to help you with your financial planning, as a wealth planner, we’ll work with you regarding your objectives and aspirations, and will continue to review these with you as your family grows, and your circumstances change. With solid financial planning in a timely fashion, at least you’ll have one less thing to keep you awake at night!
 

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.