Give yourself peace of mind and put your little ones on a sound financial footing
When you’ve got a young family to take care of, putting your finances on a sure footing can seem like a pipe dream. Even if you’ve got the energy after yet another sleepless night, you are probably struggling to find cash, to open accounts and to research investments and appropriate insurance policies. However, whether you are chasing the children around the park, or struggling with a night feed, you can improve your family’s future wellbeing by taking these six simple steps.
1. Life insurance
You insure your car, you might even insure your cat, but why would you insure your life? When you’ve got family depending on your income, life insurance can give you the security of knowing that if you died, they would still be able to live comfortably.
“If you have children, it’s important to consider how long they, and the person left to bring them up, will need your financial support,” says David Pugh, managing partner at financial advisers Lemonade Money.
He advises people to think about how much cover they might need (for example, if you have a five-year-old child you might decide to insure yourself for 15 times your salary, so that you could support him or her for 15 years).
He also suggests that you check whether your employer offers life cover, so you don’t over insure yourself, and use comparison sites to shop around.
2. A university or school fees fund
Yes, we know. It’s going to be years before your adorable little baby is old enough for school, let alone university. But now’s the time to start saving little and often to pay for higher education or even private schooling.
We all know that these costs can be expensive, so consider opening a savings account now to help you pay for your child’s education in the future.
3. Critical illness cover
Critical illness cover means that if you were unable to work because of illness, your family wouldn’t have to survive without your salary.
“The cost of critical illness cover is much higher than pure life insurance, so you may decide to opt for lower levels of cover to ensure premiums remain affordable,” Mr Pugh, at Lemonade, suggests.
4. Child benefit (even if you are over the threshold)
Child benefit has become confusing. It’s now means-tested, meaning that if you are a couple and one of you earns over £50,000 you must pay part of your child benefit back in tax. If one of you earns over £60,000, the entire of the child benefit must be handed back through filling in a tax form, so it is tempting not to sign up for it at all.
However, child benefit serves one other important function. If your child is under 12 and one of you isn’t working or doesn’t earn enough to pay National Insurance, claiming child benefit will ensure that your NI credits remain up to date so that you receive the full state pension.
Ensure that you register for child benefit (and that it’s the parent who would otherwise have gaps in their record that registers) even if you don’t receive it.
5. A Junior ISA
A Junior ISA is a tax-free savings or investment product that allows your child to get their hands on their money aged 18.
Some parents think this is a good idea, as it gives the child cash as they are just starting out as adults. Others fear that they will blow it on fast cars and good living. It depends on you and on your child’s personality.
You can put a maximum of £4,260 into these accounts in the current 2018/19 tax year.
6. A child’s savings account
One of the best investments you can make in your child’s future is in financial education. There’s no better way to get them learning about managing money than by doing it.
Children’s savings accounts allow them to take charge of paying pocket money in each month as well as understanding about interest rates, while some accounts allow a debit card from the age of 11, helping further with cash management.