I strongly believe that careful financial planning is a hugely important component of family life. As a parent myself, I completely understand how difficult it is to see past the day to day running of a busy household.
That said, too many families are failing to plan in terms of savings, whether it’s for short-term emergencies or saving for children’s third-level education costs. Secondly, an enormous number of families have little or no provision in place should one or both parents need to stop work due to illness or even worse die prematurely.
Here are my key pieces of advice, in terms of addressing and hopefully improving your longer-term financial position:
Print out a bank statement for a typical month (Not December!), then sit down to examine the various outgoings over the month and look at ways to make any possible savings and ask yourself some questions.
When was the last time I reviewed my mortgage policy, mortgage protection cover and major insurance policies?
Do I have any high-interest credit cards or other loans? Can I pay these off as soon as possible, and obtain more suitable lower interest rate options?
Can I possibly spend less on certain items like grocery shopping or on energy bills (by switching provider)?
Are there any subscriptions I am paying for that are not being used anymore?
Once you have reviewed your household expenses and created your budget, you should hopefully now find that you are spending less than you earn which now paves the way to now start saving a certain amount per month.
Before you start saving for your “wants”, the priority should be on a savings fund to cover any unexpected expenses or emergencies. This should ideally be at least 4 times your joint monthly net salary. A straightforward deposit (savings) account is the best option for this type of fund. This way, you can access your money when you need it most.
After you have covered this emergency fund, then you need to look at larger items you may need in the next five years – for example, changing the car, house renovations etc. These savings need to also be saved into a deposit account.
We find that families frequently do not take the time to ensure they are claiming and benefiting from the correct tax reliefs and credits as well as any social welfare benefits and allowances they may be entitled to.
If one or both of you cannot work and earn income due to illness or injury, your household will struggle to meet its basic expenses including education, medical expenses, or even paying the basic household bills.
Income protection cover and/or serious illness cover will provide some financial support in such an instance. Some employers do provide an element of sick pay but that may prove insufficient and only lasts for a short term.
It is never too early in life to consider this. Putting a will in place is a very smart move especially if you have children.
By doing this, some of the many advantages would be that you are ensuring that your dependents are provided for financially, you are protecting your partner if you are unmarried, and avoiding any possible family disputes later etc.
The cost of a 4-year degree programme at one of Dublin’s Universities including accommodation and fees can be as high as €60,000.
The message is very clear: Start saving now! If you could possibly start by saving your monthly children’s allowance and invest it in a carefully chosen Unit Linked Investment Plan, you will have a much better chance to meet those future costs.