What to do with your money...

Now you’ve got a little one (or ones) in the family, here are four financial concerns you really shouldn’t ignore…

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  • Life insurance

    Why it matters

    Granted, it’s not dinner table talk, but it’s worth thinking about what could happen to your family financially if you were to pass away. “The point of life insurance is to make sure your child is financially secure if you’re no longer there to care for him,” says Matt Morris from insurance broker LifeSearch (lifesearch.co.uk). If you’re relatively young and healthy, it can cost from £5 a month.

    A popular option is lump sum cover, where the insurance company makes a single cash payment that could help your partner cover things like mortgage repayments and childcare. “The other option is family income benefit, which is basically paid out as a regular income rather than a lump sum. Quite often the premiums are cheaper, so it’s worth considering,” says Matt.

    What to do  

    • Step 1  Check your current employment benefits “Some people get life insurance, or death in service as it’s often known, from their employer,” says Matt.
    •  Step 2  Shop around High Street banks are often tied to one insurer and might not offer you the best price. Use price comparison websites and speak to an independent adviser. 
    •  Step 3  Get advice on how much cover you should buy “There’s no black and white system, think logically how much your child would need until he’s 18 or 21,” advises Matt.
    • Step 4  Consider a single life policy 
Two single policies rather than a joint policy, can provide double the cover. “It’s about 10 per cent more expensive, but you’ve each got financial protection if you split up,” says Matt.
  • Making a will

    Why it matters 

    “It’s better to protect loved ones by making your own decisions and assigning a legal guardian for your children,” says James Sandbach from the Citizens Advice Bureau (adviceguide.org.uk). A will also states who’ll inherit things like your house, car and bank accounts. “Otherwise it’s going to be left for the courts to decide how to distribute your assets,” says James. If you’re not married, your other half won’t automatically inherit from you, so it’s important to make sure they’re legally protected. You can write a will yourself, but it may be best to go through a solicitor. “DIY packs on the internet do work, but  they really only deal with straightforward situations,” explains James.

    What to do

    •  Step 1  Decide who’ll look after your children Most people appoint family members, but discuss this with them first to make sure they’re OK with it. 
    •  Step 2  Work out your assets Before you start you need to know what you have. Write a list of what you own and how you’d want it to be distributed.
    •  Step 3  Choose an executor 
This could be a family member, or your solicitor, who’ll carry out your wishes.
    •  Step 4  Store your will safely 
Keep a copy with your solicitor and one  for yourself and the executor. Remember to update it if you have another baby.

    “My hubbie and I have both made wills to ensure the kids are looked after if anything happens to either of us. I’ve also taken out stakeholder pensions for them.”

    Stephanie Rose, 37, from Suffolk, mum to Eleanor, 2, and William, 6 months

  • Saving for your little one’s future

    Why it matters

    With rising food and fuel bills, saving for your baby’s future might not be a priority now. “But if you save little and often, by the time your child’s 18, you’ll have built up a nice nest egg,” says Mary Graham from the Money Advice Service.

    If you’re thinking long-term, the Government’s set to launch tax-free Junior ISAs in November, which replace the Child Trust Fund*. “A Junior ISA account is the same as an adult ISA and allows parents and grandparents to deposit up to £3,600 tax-free each year, so it’s a very tax-efficient way of saving,” says Mary. Your child won’t 
be able to withdraw the money until he turns 18 though, so if you’re after something he can dip into, you’re better off with an easy access savings account from a bank or building society. Visit moneyadviceservice.org.uk for more details.

    What to do

    •  Step 1  Work out how much you can afford to save “Most people do find 
there’s a little bit spare that they can put aside. Our online financial health check tool (moneyadviceservice.org.uk) can help you identify any spare money,” says Mary.
    •  Step 2  Decide on your savings goal Long-term options include a Junior ISA, investment trust, or even a private pension for your little one. You can continue paying into an existing Child Trust Fund, too.
    •  Step 3  Compare interest rates 
“Some banks try to entice you with freebies like piggy banks, but you should shop around for the best interest rate,” says Mary.
    •  Step 4  Set up a direct debit You can save without the pain with automatic monthly payments as you don’t really notice the money going out.
  • Saving for your future

    Why it matters

    You’ve just become a new parent, so retirement’s a long way off, right? “The state pension as it stands would be around £5,000 a year, which isn’t going to go far,” says family finance expert Sue Hayward (suehaywardmedia.com). So how much should you be saving for a comfortable retirement? “Pension experts say you should halve your age and express it as a percentage of your salary. So if you’re 30, you should be saving 15 per cent of your gross salary, which is quite a big chunk,” says Sue. It’s worth paying into a company pension scheme, as your employer usually pays in money, too. 
“More long-term investments may be buy-to-let property or share-based accounts,” says Sue.

    What to do

    •  Step 1  Clear debts first. You might 
feel great sticking £20 a month away, but if you’re still paying credit card debts, where interest rates are sky high, then earning 2 per cent on your £20 doesn’t add up.
    •  Step 2  Seek expert advice Visit unbiased.co.uk and they’ll email you three independent financial advisers in the area regulated by the FSA.
    •  Step 3  Start small Sue advises opening a cash ISA. Most are instant access, you can pay in from £1 and save up to £5,100 per tax year.
    •  Step 4  Set up a regular saver account “It’s a case of having some money that you can get at, rather than sticking everything in long-term accounts, so set up a direct debit for a regular saver account, too,” says Sue.