Adviser Insight is a thought leadership series showcasing the perspectives and expertise of our firm’s financial advisers. Each article offers in-depth analysis on topics shaping the financial landscape, grounded in practical experience and strategic thinking.
Financial Planning for Families: A Personal Perspective
As a dad of a two-year-old with another little one on the way, I know how easy it is to get caught up in the whirlwind of parenting. Sleepless nights, the never-ending battle with toys strewn across the house, and the constant juggling act that comes with raising young children often leave little room for anything else, especially financial planning.
But here’s the truth: amidst the chaos, staying on top of your finances is vital – not just for today, but for your family’s future. With a little forethought and some practical steps, families of all kinds can take control of their finances and set themselves up for success, no matter their income level.
Budget: The Foundation of Financial Stability
Whether you’re just starting out or you’ve built a successful career, one thing remains true for every family: a budget is essential.
When we first became parents, we noticed how much our finances shifted; whether it was maternity leave, part-time work, or one of us deciding to stay home with the kids. The added costs of childcare, nappies, soft plays (and coffee!), and all the other little things that come with raising children are eye-opening.
And budgeting doesn’t stop when your kids grow older. I recently worked with a family whose income and assets puts them firmly in the ‘wealthy’ category. They are helping their kids through university which, on paper, should be affordable for them, but they were living month to month, simply because they didn’t have a budget in place. No emergency fund, no planning for unexpected costs, like a broken boiler. That’s a mistake anyone can make, no matter their income.
Whip out the Excel spreadsheet, sit down with your partner, and spend a few hours (split across a few nap times!) building a clear picture of your expenses. Go through your Direct Debits and Standing Orders, check interest rates on credit cards, and consider potentially refinancing the car – these are often areas where quick savings can be made.
Protection: It’s About More Than Just Life Insurance
I’m sure many of us, myself included, never thought we’d need to consider the risks of critical illness, disability, or even death for a long time. But since my little girl was born, I’ve never thought about my own mortality more. As a parent, protecting your family’s financial future is not only crucial, but it’s also your responsibility.
Most people have life insurance to cover their mortgage, but income protection and other sickness cover is often overlooked. I often ask clients: you may be insured in the event of death, car accidents, or house fires—but what about if you’re unable to work due to illness or injury? What if you were unable to ever work again?
Income protection replaces a portion of your salary if you become unable to work. It’s something I often recommend to my clients, even those in their 50s preparing for retirement. At that age you might think they don’t need it, but protecting your ability to earn during the final working (and accumulating) years is just as important as any other type of insurance. Often, an unanticipated early retirement would have negative long-term effects. Even those with higher levels of wealth can benefit from this kind of coverage.
And let’s not forget the impact of losing a spouse. Whether it’s the main breadwinner or the primary caregiver, the financial repercussions are often far greater than we imagine and often far greater than just paying off the mortgage. Family Income Benefit or additional life insurance could help support your family if the worst were to happen.
If I die today, my partner will not only have a mortgage-free home (mortgage cover) but a steady income stream (Family Income Benefit) for the next 21 years to support her with raising our children, as well as additional capital (life insurance) for our daughter’s education, first homes and cars and anything else they might need. This helps me to sleep at night.
Wills, Power of Attorney, and Other Estate Planning
As a parent, one of the hardest things to think about is what would happen to your children if something happened to you. This is where estate planning becomes vital.
Wills, powers of attorney (POA), and trusts are all essential tools in ensuring your family is looked after in the way you want and by who you want in the event of an emergency. While it’s not pleasant to think about, guardianship instructions for your children should be clear and in place.
A point I often raise with clients is the possibility of “sideways disinheritance.” If you died so all your assets go to them, then your partner remarried and had another child, then your partner died, the assets might go to their new spouse, leaving your children without the inheritance you intended for them. Clear planning can avoid this and ensure your wealth and your children’s future is protected.
Wills and POA is one of those things that often gets pushed aside, but as parents, it’s one of the most important steps we can take to secure our families’ well-being.
Investments and Savings: Growing Your Family’s Future
Once you’ve covered the basics—budgeting, protection, and Wills and POA—you can start thinking about saving for your children’s future.
For young families, Junior ISAs are a fantastic option. With an annual investment limit of £9,000 per child, it’s a great way to start saving for your child’s future. You can hold the money in cash, but if you’re in this for the long haul, investments within the wrapper might be more beneficial.
For those who want more control over their children’s savings, a standard investment account could be an option—but keep in mind there may be tax consequences.
If you want to go even further, consider setting up a Junior SIPP (Self-Invested Personal Pension). I’ve seen the incredible impact this can have—one child had over £100,000 in their pension in their 20’s, thanks to their parents’ foresight. It’s never too early to think about saving for your child’s future, and starting a pension from birth is a fantastic way to build long-term wealth. There is a £3,600 gross (£2,880 net) per year limit into pensions for children.
That said, don’t lose sight of your own financial health. It’s easy to get carried away with saving for your kids, but it’s crucial to make sure your own retirement and long-term financial plans are in place first.
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Remember, every family’s situation is different, so it’s always a good idea to consult a qualified independent financial planner who can help you navigate these decisions. It’s an investment in your family’s future—and trust me, it’s worth it.
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
If this article has raised questions for you, feel free to get in touch!
Freddie Barton
Independent Financial Adviser
Find out more about Freddie here