Planning for change
Starting a family inevitably means changes to your finances. With more mouths to feed and new priorities, it is likely your money will need to be distributed differently. Saying this though, it doesn’t have to be a concern and planning ahead helps to ensure you are starting off your family life in the best way, financially.
Understand maternity and paternity benefits
If you are eligible, a women can take up to 52 weeks as maternity leave. This period is broken into two X 26 week periods, the first period is “Ordinary Maternity Leave” and the second period is “Additional Maternity Leave”.
Statutory Maternity Pay (SMP) is available for eligible employees. This can be paid for up to 39 weeks, as follows:
- 90% of your average weekly earnings (AWE), before tax – paid for the first 6 weeks
- £139.58 (16/17), or 90% of your AWE, whichever is the lower – paid for the remaining 33 weeks
- This calculation applies for the male parent too, however for just a maximum of 2 weeks.
Tax and National insurance are deducted from these figures by the employer.
Some employers offer additional maternity benefits by way of a Company Maternity Scheme. Check to see if your employer offers something extra.
The company policies must clearly explain the offer, and these documents need to be available to all employees.
Review childcare options
Childcare can be costly so it is important to research options if childcare is going to be necessary.
Check with your employer if they offer a Salary Sacrifice Scheme. Often an employee can claim childcare vouchers instead of salary, as a non-cash benefit.
This can work out more tax efficient than taking the salary and then paying the childcare costs.
It is an incentive more employers have been introducing as there is a tax saving for them also.
Budget for new expenses
Having a baby costs money, there is no doubt about that. Particularly, with the first child as there are “set-up” costs to getting everything the baby will need. Of course, generous friends and family may hand down some things, but more often than not there will be initial items you need to purchase.
Budgeting for this up-front, or buying things regularly throughout the pregnancy period, can help to ease the burden of dishing out all in one go.
Ongoing costs are also going to change in the coming months and years, so it is important to understand where your money goes each month, so you can ensure there is surplus.
Naturally, things usually fall into place, as with a baby the Saturday night dinner in your favourite restaurant may be cut down to once a month, not once a week.
However, planning ahead and keeping on top of your finances is always advisable when change is coming.
Revise long-term savings goals
Up until now, you may have been happy saving away your surplus income and blowing it on a luxury holiday, or splashing out on a new car every few years.
When starting a family your priorities change and you may find that, even when your child is still at a young age, you may want to start saving some money away for your their future; their education, or their first home, perhaps.
Revising your longer-term savings goals are important to factor in how much income you need to support your own goals and that of your family.
Pay off debts in advance
If you can pay off your debts in advance of starting a family it will ease the monthly expenditure that goes out of your account.
If you have savings as well as debts, why not consider tidying up your financial position by clearing old debts? It is then more possible to focus on building your savings again in the near future.
Of course, it is always good to have a “rainy day” fund, especially with a new family on the way.
However, being debt-free gives peace of mind that your income is your own, and it’s a little easier to manage.
Review health and life insurance policies
When starting a family you are likely to feel significantly more responsible, and you are.
If you are the main earner in the household, what would happen if you were to die, become sick or be unable to work for another reason?
Would your mortgage be covered? How many months could you survive on savings?
Investing a small amount each month for Life cover to protect your home in the event of death, and Income Protection insurance to protect your family’s income stream, becomes even more important when you have a young family.
Review all your policies too, to ensure they have the correct level of cover for your current situation.
Update family documents, such as your will
If you don’t already have a will in place, now is a great time to start. A will enables you to clearly state how you want your wealth to be divided in the event of sudden death.
A will also determines who would be responsible for your child in this event, so it really is essential when starting a family to ensure that this important document is up-to-date.
It doesn’t take long and it isn’t costly, so there really are no reasons to delay.
Need help with family financial planning? Speak to Darren
If you are starting or growing your family, Darren can help with planning to meet your financial goals to suit the stage in your life and your current requirements.
Tel: 01403 780 770