Darren Scott-Guinness: Keeping doctors and dentists informed with the latest financial and investment news.
The majority of households these days don’t fit the “married couple, dad going to work, mum staying at home, two kids and a dog”, model. The shift in the family “make-up” has been profound in the last thirty years and along with that requires a shift in money management and financial planning. What factors apply with financial planning for the 21st century family?
One size no longer fits all
Financial planning strategies have historically been based on the fairy tale family set-up, which, due to drastically changing demographics, rarely applies these days.
Divorce, remarriage and shared custody are common, so households are blending in terms of their finances. Also, unmarried partners living together, married gay couples, single parents, and a host of other situations arise that require a re-think in the approach to financial planning.
Bespoke financial planning is therefore becoming more appropriate, as there is no longer the “one size fits all” option.
What works for one family arrangement, won’t necessarily work for another, as demands and expectations vary.
Here we look at a few common situations, the biggest financial hurdles, and some simple steps to overcome the issues.
The blended family
Blending two families following remarriage, or cohabiting with a new partner, often comes with financial baggage.
Typically, it is difficult to merge finances in their entirety in this situation, as each partner will usually still be focused on their own children and their own financial targets, which may include having to pay some form of monthly maintenance to their x-partner too.
Dividing who pays for what in a blended family household is possibly the biggest hurdle and can cause upset, even for the happiest of new couples. Overcoming this requires a fair approach where possible, which doesn’t always mean an equal input, just fair.
Working together on money management can help ease animosity and even if separate bank accounts and financial objectives are maintained, having a small joint financial goal may be a way to unite the new household.
It’s important to ensure that a will is in place to clearly lay down who gets what of your finances in the event of a sudden death.
Unmarried partners living together
Also common these days is the cohabiting couple, who’s biggest concern is likely to be how to handle jointly-owned property, and other assets of value, whilst not protected by the realms of a marriage certificate.
Whilst employers and tax authorities are making steps to recognise committed relationships, unmarried couples still lose out, falling short on things like survivor tax breaks and automatic inheritance processes.
The civil partnership is becoming almost as recognised as marriage now in many financial and tax situations, so this is an option more couples are exploring to gain legality over their relationship.
Outside of any formal legally binding partnership though, it is important to lay out, from the start, the ownership of jointly owned assets.
When purchasing a house together, joint ownership will apply giving automatic rights of survivorship in the event of the death of one partner. Alternatively, a “tenants in common” title can detail the proportion of the asset owned by each partner, often linked to the amount of money invested, which will apply on the sale or disposal of the property.
A will is also essential to outline who inherits each individual’s share of any assets upon sudden death.
Also, it’s important to keep any personal finances in the individual’s name, such as loan or car finance – should the finance be taken in joint names, both become equally liable.
The single parent
The number of single parent households has been slowly climbing over the years. The biggest struggle for the average single parent is typically managing increased costs with a lower household income.
Single parents rarely are able to put themselves first financially, as they are always saving for their child’s future, or for emergencies. Maximising the government tax initiatives, such as childcare vouchers, help out single parents in the short term.
Making structured savings into ISA’s and pensions, however small, can help provide peace of mind in the long-term too.
Negotiating maintenance payments carefully with the child’s father, where possible, helps to keep the financial burden a shared responsibility, and also, ensuring there is an up-to-date will in place, protects any owned assets.
The single, unmarried, no kids
In the 21st century world there are also more singles – those who choose to remain unmarried with no children.
For this slice of the population, the biggest concern is likely to be who will take care of you if you’re an older single and you fall ill and are unable to work, earn income and pay your household bills.
Whilst being financially independent can often be considerably less complex there is also the downside of not having any support team there to catch you if you fall.
This is where insurance covers play an important part in financial planning. Considering critical illness cover and income protection insurance will help to maintain a comfortable lifestyle in the event you are unable to work. Life cover probably wouldn’t be needed, without dependents, however an up-to-date will ensures that any assets you have will be correctly allocated in the event of your death.
Also, boosting retirement planning will be helpful to ensure your nest-egg is big enough to support you, as there won’t be the option to rely on someone else’s pension or wealth – it’s down to you!
Dental & Medical Financial Services can help you with careful and bespoke financial planning with an open minded approach to the 21st century family set-up. Call Darren to discuss your requirements.
Tel: 01403 780 770