Family Finances and Planning For the Future

Becoming parents and having children is something that takes some careful financial planning. You don’t want money to become something that is a stressor for the family when you have little ones around. But as you go through life with a family, there are a number of things to think about and plan for. For example, having money for all of the things that you need when your children are babies is one thing. But have you thought about the family finances later down the line, from University fees to mortgages and your will? There are a number of things to make sure that you are aware of and planning for, in order to secure the best financial future for yourselves, as well as having things set up for your children when they are older, and you are gone. 

So here are some of the things that you should think about with your family’s future in mind, and how you can take the steps to make sure that the plans that you want in place, can be put in place.

If you don’t have children yet but are planning on it, then now is a good time to think about how much money you think that you will need in order to do so. What are the things that babies need right now, and what are their needs going to be going forward? 

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The cost of raising a child

The costs of raising children do vary, and it does depend on where you live and the kind of lifestyle that you are looking at. But recently, it has been found that the estimated cost of raising a child until the age of 21, at the moment, is around £10,800 per year. When you think about this alongside household incomes, then the average total household income in the UK at least, is just under £40,000. So with that in mind, it is just over a quarter of the household income spent on raising a child each year. These numbers can vary, and they do increase over the years, but for family planning, it is definitely something to consider when you think about your current income. When you have a rough idea of what you will need, it can help you to plan, save where necessary, and work things out from there. 

Family goals and milestones

When you are raising a family, it is a good idea to have some family-oriented goals or targets in mind, in order to help you to achieve much more as you go about your lives. They can help you grow as a family unit as well, and help to teach children important lessons, such as the value of money. Some examples of goals that could work well for a family are:

• Getting out of any debt that you have (other than a mortgage, though have a plan to have it repaid before retirement)
• Having a ‘rainy day fund’ as you never know what kind of emergencies will come up, especially with children
• Live on less money than you earn
• Save for large expenses, rather than getting on credit

To help you to decide on your family goals or targets, then having a checklist to help you to work out what the best goals will be for your family is a good idea. You could ask yourself some questions, such as what kind of result you want to have from the goals. It is also important to note that not all goals are going to be quickly achieved, so you should think about how the goal will look, on a practical level, so you will be more prepared for what to expect. There is also probably not much point in setting any goals that you don’t think that you will be able to achieve. So think about the things that you want, but be realistic. Asking yourself these kinds of questions, and then being able to tick them off, can help you to get to where you want to be at the end of your life, and have the things in place that you want for your children. 

It may sound a little bit morbid when you talk about these kinds of things, but if they aren’t planned for, then that is where goals aren’t achieved, and where issues can arise. There are many instances of problems with wills and estate once parents have passed, needing the help of Worrall, Moss, Martin Lawyers, for example. But if you don’t want your children to have to go through that, then firm plans need to be in place, sooner rather than later. Nothing should be expected in life, so it is important to think about what you want things to look like, before it is too late.

Lifetime Mortgages and Equity Release

If you are thinking about your finances as you get older, then there are some things to consider, such as Lifetime Mortgages and Equity Release schemes, although they do have some elements of risk to them. As well as often having higher interest rates than you would get with a traditional mortgage, these ways that could help manage your finances, could limit your ability to qualify for certain benefits and grants, which as a result, could impact the inheritance that your family gets. Having said this, for a number of people, depending on the circumstances, getting a lifetime mortgage or looking into equity release can be considered good options. What it is all about is helping you to release a lump sum of money to then be able to spend, to spend as you like, or to help you to stay in your home for much longer. For growing families, this could be a consideration, and when money is needed, perhaps for a wedding, then it could be used in this way. 

Lifetime Care

We are all living for longer, which is a great thing in many ways. However, it can mean that there are some uncertainties about healthcare, it is so important to think about being able to provide for your own health needs in the long-term. So looking into a variety of different possibilities, along with their plus sides and the negative sides to them all, is important to consider. If you need care as you get older, and you don’t want it to fall to your children, then it is important to plan ahead, and balance out your care needs, along with being able to protect your assets and income as you age. This in turn, will help your children down the line too, which is what the majority of us want as we get older.

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Planning ahead

Making sure that you are able to set up your finances is not just about right now. Having them in order is important, of course. But it is a good idea to put plans in place financially that are going to help your children down the line, and as a result, could impact any future grandchildren. So here are some aspects to think about. 

• Life insurance

Life insurance is easily one of the very most important things that you can do for yourself and for your family. It is all about protecting yourself for when something unexpected happens, and likewise, when the inevitable happens. So getting life insurance in place is important, and is so for a number of reasons. 

Life insurance can help to pay off any debts, such as what happens if something unexpected happens, and there is a mortgage to pay. When there isn’t life insurance to cover costs, then it could mean having to sell a family home, for example. Life insurance can also help your family when it comes to funeral expenses, because sadly, they are not cheap, but as imagined, are a necessity. If you or a partner were to pass away unexpectedly, then using the money from some life insurance can help to replace any lost income that can come at such an uncertain time, especially if they were the main earner in the home. 

There are a number of things that are considered when it comes to life insurance, though, which are important to bear in mind. The more ill-health that you already have, or the more you smoke and drink can all play a part. To get the best premium, and at the most affordable price each month, you should start getting life insurance when you’re young, and be as healthy as possible. Once you have the life insurance cover in place, then it can give you such peace of mind that things will be taken care of, should anything happen unexpectedly, as well as things happening as expected.

Estate and your children

You are likely to want to leave your property (estate) to your children when you pass on. Depending on how old they are at the time, this could be something that is immediate, or something that is a gradual process. Trusts are something else that can also be set up, helping to prevent inheritance tax to some degree. You shouldn’t just presume what you have will go to someone; you need to write it down formally. 

 

*This is a collaborative post.