Raising children can put huge pressures on the family purse strings. Given the vast expense, it makes sense to start planning early - possibly even before they're born. Talk to an expert and find out how they can help.
What to do for the best.
At a time when you and your partner are firmly focused on the new arrival, the last thing you want to consider is your finances. Which is why it's a good idea to have a chat with an Independent Financial adviser (IFA) in the early months of the pregnancy, rather than leaving it to the last minute.
It's worth remembering that when one of you stops work to start a family, you could lose more than half of your joint income, even if there are plans to later return to full time employment. In which case it's essential to look into some sort of financial protection should the breadwinner die or be unable to work. There are a number of things you both might like to take into account:
Pension arrangements
If you've been paying into a pension, whether it's a company scheme or your personal one such as a stakeholder, a career break could significantly affect the value if you stop paying the premiums. If you have to stop paying in your IFA can advise you on the costs of "topping-up" your premiums, or help you with Additional Voluntary Contributions ( AVCs) when you are able to re-start premiums. However long you take off, it's important to re-start your pension as soon as possible.
Life insurance policies
Now you've started a family, you and your partner might want to think about some form of life cover to feel more financially secure. There are all sorts of different products available: term assurance; whole of life assurance; critical-illness cover - the choice is endless. Your IFA can take you through all the different options, advise on costs and recommend the best policy or policies for you.
Investing money for your child
On top of the day-to-day expense - nappies, baby equipment, childcare costs should you go back to work - there is the question of long term financial planning for your child's future. With many savings plans open to you, the best option is to seek independent advice. Your IFA has all the choices at hand from National Savings Children's Bonds, With Profits policies through to tax efficient ISAs. He or she will also be able to advise you on the tax advantages. Children currently have their own tax allowance of £6,475 a year and a full capital gains tax allowance (tax year 2009/2010).
Statutory employment rights:
As a woman thinking of starting a family, it's well worth your while asking about your statutory employment rights. As a rule, you're entitled to Statutory Maternity Pay (SMP). Your IFA will be able to point you in the right direction to where you can get further details.
Decisions made simpler:
It seems a pity that having a baby usually goes hand-in-hand with juggling your finances. Some of the stresses can be easily and quickly resolved with a friendly chat with your IFA. We feel sure you'll find it extremely helpful and...productive.
Some questions you might like to ask your IFA.
- Are there any private medical insurance plans that cover pregnancy?
- What's the most tax efficient way to invest in my child's future?
- What's the best way to put money aside for school fees?
- How can we manage financially on a single income?
- Is there a tax efficient way for grandparents to transfer money to grandchildren
For details of local IFAs who can advise you on a wide range of financial services, click online at www.unbiased.co.uk .
This factsheet has been approved by a person authorised and regulated by the Financial Services Authority. The value of investments can go down as well as up. Past performance is no guarantee of future performance. This information is based on current legislation and government benefits, both of which are likely to change. The name IFA Promotion® and the Independent Financial Adviser (IFA) logo® are registered trade-marks of IFA Promotion Limited.
March 2009
