Money Talks: Should I have a running away fund and how much should it be?

Our reader is a mum of three in her forties and worries about financial security for the future

I am 45 years old and a full-time working mum with three young kids. Between work, caring for my kids and looking after the house, I really feel like I am being pulled in all different directions and I am finding it all very stressful. This has left me with very little time to attend to financial issues and I really feel like I might be missing out or that I am putting my family and me at risk by ignoring this area for too long. Please help!

Your situation is so common and as a full-time working mum myself, I completely identify with how difficult it is to keep all those plates spinning and there is little doubt but that the double responsibilities of work and home can be demanding and at times very stressful.

The first thing I would strongly advise you to do is to engage with a professional financial adviser as soon as possible to discuss your situation and then it is their job to advise you on putting a detailed financial plan in place that could save you and your loved ones from possible financial hardship and uncertainty in the future.

I am going to share with you some simple action steps that you can take now to prepare and protect you and your family financially well into the future.

Running Away Fund

I would firstly advise you to establish an emergency fund or as I like to call it, the “running away fund”. This should ideally be at least three times your net monthly salary and invested in a bank account that you can access in a hurry. This will be your emergency kitty which you may need in the event of an unexpected change in your employment situation or God forbid, you need to make a hasty exit from a certain situation. If you do not have this fund in place, you are completely exposed to a possible emergency situation. This fund should also be over and above any other short-term savings for items such as holidays, car maintenance etc.

Contemplate your Cover

Few working mothers stop to think of the financial impact that the diagnosis of a serious illness or injury or even their premature death would have on their dependents. As you are a major contributor to the household financially and practically, you need to take advice on your options regarding life cover, critical illness and income protection cover. It is essential for those with dependents to have additional life cover in place outside of mortgage protection (this will only pay the bank in the event of premature death). 

If you are unable to work due to an accident or serious illness, then critical illness and income protection policies would ensure that you have enough money in place to cover your essential household costs like mortgage payments, household bills, childcare etc. The good news is that generous tax relief is available on income protection and some life cover policies, so it is generally not expensive cover.

Financial Planning for Third Level Education Costs 

Saving for third-level education costs is one of the most common goals of my clients and starting with small contributions early and often can make a huge difference down the road. Consider the various investment vehicles available to you to ensure that your hard-earned cash can at least beat inflation and at best provide you with an excellent return over the long term.

Carol Brick

Pensions and Retirement Planning 

It is never too late to start a pension, however, the sooner you start the better plus it will lessen the financial burden of starting it too late in life. Better still, the more you contribute, the more tax relief you can claim, so why not avail of this free money now? Then more good news, the fund will grow tax-free and you can draw down part of the fund tax-free when cashing in your retirement benefits. It really is the most tax-efficient way of saving. 

If you are an employee and your employer offers access to a scheme, then make sure you join the scheme if your employer will pay a contribution – again not doing so is turning away free money! Always seek advice, understand where your contributions are being invested and that they are suited to your investment risk profile and time frame to retirement.

Make a Will

Very worryingly, less than a third of Irish people have a legal will in place. Having slaved all our lives, why do so few of us care about what happens to the assets we have built up when we are gone? As you have little people who are financially dependent on you, then having a valid will in place is of the utmost importance.

Examine your Entitlements 

Ensure you are claiming and benefiting from the correct tax reliefs and credits as well as any social welfare benefits and allowances you are entitled to. 

One last piece of important advice from one busy working mum to another and from personal experience is in relation to the importance of an appropriate work-life balance or even finding this if you have trouble defining it. Learn to set boundaries, ask for help, be realistic and most especially be kind to yourself. This is equally as important as getting your financial ducks in a row.