If you have a young family, ensuring their security is likely to be a priority. It’s something that should be built into your financial plan to provide peace of mind.
Taking these five steps can help you protect your loved ones and the aspirations you have.
1. Consider long-term goals for your family
When you first set out a financial plan, did you take your family and your aspirations for them into account? It may be something you’ve overlooked.
For instance, do you want to lend a helping hand to support children through university? Or perhaps you hope to provide them with financial support when they are ready to buy their first home? When you have young children, these goals can still seem a long way off, but they’ll come around sooner than you think.
Making these goals part of your financial plan now means you can save or invest in a way that aligns with these aspirations and you can have confidence in the steps you’re taking. It’s a process that can provide your children with more freedom and choice as they enter adulthood.
2. Build up an emergency fund
Financial shocks can happen at unexpected times. This may include temporarily being unable to work or facing a significant bill that isn’t part of your normal expenditure. Financial shocks can derail plans and harm your lifestyle.
However, a Schroders survey suggests it’s an aspect of financial planning that many Brits are overlooking. When marked on the steps taken to protect against the unexpected, the average survey respondent scored just three out of 25.
Ideally, you should have between three- and six-months expenditure in a readily accessible emergency fund. This means should you face a financial shock, you’re able to keep up with expenses, from school fees to utility bills. It’s a vital step for protecting your young family in the short term should something unexpected happen.
3. Save for their future
When a child comes along, parents will often open a savings account in their name. Even small, regular contributions can add up over their childhood. You may also want to deposit gifts into these accounts, such as those given by grandparents to mark birthdays. However, if you haven’t set out a plan for saving for their future, you could be missing out on opportunities.
For example, a Junior ISA (JISA) is a great way to save long-term as you will often find they offer higher rates of interest than a typical savings account. For some long-term goals, investing may be an option to consider rather than saving. Investing could generate larger returns, but this will need to be balanced with risk.
Making saving for a child’s future part of your wider financial plan can help make sure you stay on track and get the most out of your money.
4. Write a will
A will is important for families for two key reasons.
1. It’s where you set out how your wealth will be distributed after you pass away. Without a will in place, your assets would be distributed according to intestate rules. This may not align with your wishes. It’s particularly important that a will is set out if you’re not married or in a civil partnership or if your family is complex, for instance, if you have children from a previous relationship or want to provide for stepchildren.
2. A will enables you to assign a guardian for your children. If a guardian is not appointed, and no other parent with parental responsibility exists, the court will decide who is responsible for your children. Again, this may not align with your wishes.
Despite the importance of a will, Will Aid found 48% of parents with children under the age of 18 do not have a will in place. If you die without a will it could leave your loved ones in a difficult position and potentially cause conflict among family members. A will can provide security and confidence.
5. Take out appropriate protection products
While no one wants to think about something happening to them or the people they love, planning for the unexpected can improve your financial security. Taking out appropriate protection products can mean that should something happen, you and your family or able to focus on what’s most important.
Income Protection, for example, can provide you with a guaranteed income if you’re unable to work due to an accident or illness. That means your family don’t suffer financially as a result and you’re able to focus on recovering rather than worrying about how essentials will be paid for. You may also want to consider Critical Illness Cover, which would pay out a lump sum for certain diagnoses, this could cover just you or your entire family. Again, it can give you some financial freedom at a difficult time so you’re able to focus on what really matters.
It’s also important to consider how your family would cope financially if you or your partner were to pass away. It can be difficult to consider, but it provides you with an opportunity to put appropriate protection in place. This may include Life Insurance, which would pay out a lump sum on death and could be used to pay off any remaining mortgage debt, as well as cover day-to-day expenses. Alternatively, Family Income Benefit is designed to pay a regular income to your loved ones if you die. Both these products can ensure your young family is financially secure should the worst happen.
Not all financial protection products will be suitable for your circumstances and goals. A plan may not cover all illness definitions so it’s important to weigh up the benefits and how they fit into your plan. Protection plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.
Please get in touch if you have a young family and would like to discuss how you can secure their future with the financial steps you take now. We understand how important family is and how taking steps to improve your financial security can provide peace of mind.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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