5 top financial tips for new parents
When your bundle of joy arrives financial matters might not be at the top of your list of priorities, but with a new or expanding family, it's best to get your finances in order. Scott Gallacher, a Chartered Financial Planner with Leicester based independent financial advisers Rowley Turton gives his top five tips for new parents.
1. Protection – It's never nice to think about death or serious ill-health, and that's why many of us put off arranging life assurance or critical illness cover until it's too late. But with additional responsibilities it's more important to protect your family should the worst happen to you. The day-to-day cost of raising a child is often overlooked when families try to work out their life insurance needs. The weekly cost of raising a child is £197, which is £184,392 over 18 years!*
2. Gifts – On a nicer note, a new arrival normally sees friends and family giving the new one gifts. But there are only so many money boxes, or silver items you want to polish, so why not consider drawing up a gift list or asking for cash instead? That way you can start baby off with their own little nest egg e.g. money towards university, their car, etc.
3. Savings – Many people give money on Christening, birthdays, etc. so it's a good idea to put this away for baby's future as they grow up so fast that university will be here before you know it. Gallacher recommends that any savings be invested in a tax free Junior ISA (JISA). There are 2 types of JISA, cash or stocks and shares but with interest rates so low at the moment Gallacher prefers investment in a stocks and shares JISA to give you the best chance of growing baby's money over the next 18 years. You can invest up to £4,080 in a tax free JISA each tax year at the time of writing.
4. Wills – Too few people even have a Will, let alone keep it up to date. But with baby's arrival you should arrange, or update, your Will to ensure that you have addressed the thorny issue of guardianship and, if you are unmarried, that your partner is provided for.
5. Child Benefit – All parents should claim Child Benefit which helps cover some of the additional expense of children. Unfortunately if one parent has an income over £50,000 a year you lose some or all of your Child Benefit by way of a ‘High Income Child Benefit Charge’. If either parent has an income over £60,000 it may seem pointless to even register for Child Benefit as the tax charge wipes out your entire Child Benefit. However Gallacher explains that registering for Child Benefit is essential to ensure that non-working parents qualify for National Insurance credits towards their future state pension.
Finally Gallacher recommends that, as tempting as it may be, parents avoid getting too carried away spending in the baby stores as it's too easy to slip into debt buying the latest 'must-have' pram, baby wear or accessories.
For help in improving your finances, it's worth speaking to an independent financial adviser (IFA). You can find a well-reviewed IFA near you on VouchedFor or, if you prefer, you can claim one of 10,000 free financial plans that VouchedFor are offering in 2017.