Startling figures from LV= have shown that the cost of raising a child has significantly increased over the last ten years, with figures rising 55% from £140,000 to £218,000 in 2013. We reported in one of our recent blog posts about the cuts to child benefits, and coupled with ever increasing tuition fees, the cost of raising a child is rather daunting. It also beggars the question, how do you secure your family’s financial future? Total Cost Education Childcare and babysitting Food Clothing Holidays Hobbies & Toys Leisure & Recreation Pocket Money Furniture Personal Care Other TOTAL
Difference year 5.1% 2.7%
£18,667 £10,781 £15,532 £9,248 £7,303 £4,337 £3,373 £1,143 £13,761 £218,024
4.0% 3.7% 1.6% -4.6% -0.6% 4.8% 2.5% 2.6% 4.8% 3.3%
Difference from 2003 120% 57% 25% -5% 36% 4% 15% 28% 62% 24% 56% 55%
Create Financial Consulting are unique in that they provide lifestyle planning, which means that we are cash- flowing for the events in your life and planning for the unexpected. We are therefore perfectly positioned to help you prepare for the living costs associated with children. #Create Financial Consulting# are committed to your future, which means helping you to look after what’s important to you, and we can’t imagine anything more important than your loved ones. LV= statistics show that the most expensive years of raising a child are between the age of 18 to 21 when a child leaves home and enters higher education, followed by those years when they are aged one to five, as they are constantly growing and have the greatest need for childcare. So, let’s begin at the beginning... Preparation How prepared are you?! You will be only too aware that there are lots of things that you need to take into account when having children. Where do you start?! One way that#Create Financial Consulting# can assist you is to with evaluating how best to plan your maternity or paternity leave. We use our unique lifestyle planning tools to examine your objectives and see whether they are achievable. A prime example of this could be the amount of time you would like to take off for maternity/paternity leave. We can help you to understand what you can and cannot afford and what adjustments you might need to make in your lifestyles to help you get what you want. When your baby is born, commonly one parent will take a reduction in their salary to be able to look after the baby full time in the early months. Coupled with this reduction, you will also have the increased costs of providing for your child (yes, nappies really are that expensive!), As a result, we believe that it’s essential you have a plan in place to take all this into account. It’s back to work you go...! So, your child is here, you are back at work. Now what? Did you know that if your employer offers Childcare vouchers then you can actually reduce the amount of tax you pay. You can do this
through salary sacrifice at source. This means that the vouchers are paid out of your salary before tax is deducted, so you pay less tax which can only be a good thing! It is also worth mentioning here that where a mother is expecting a second child and is currently buying Childcare vouchers out of their gross salary, their employer has to pay for the vouchers on her behalf, at the same level as the mother has been, whilst she is away on maternity leave. Money Talks As we mentioned previously, Create are adept at helping, through our lifestyle cash planning, to evaluate your life objectives and see whether they are achievable. Need a new home to house your ever expanding brood? Let’s have a look. Need a new, bigger car to ferry them from A-to-B? Let’s have a look. No, we don’t mean we’ll come and sit in the car with you, but we’ll look at the viability of all your objectives and if they are not achievable we’ll help you to adapt them until they are. The other elephant in the room is university. Sending your child to university is an expensive business and with the cost of tuition not getting any cheaper, it’s important that you prepare to make sure there isn’t too much of a strain when it comes down to it! Again, we can’t emphasise enough the importance of planning and saving effectively to make sure that you have the funds when you need them. When saving, rule 101 is to make sure that you are doing this in the most tax efficient way. Our recent blog on this will give you the low down on #Tax Efficient Investments#. Other things to think about for your family Savings for kids If your child was born between 1 September 2002 and 2 January 2011, you will have received between £50 and £500 (£250 in most cases) from the Government towards a Child Trust Fund, which you can continue to top up with contributions of up to £3,600 per year. If your child was born after this date, they are eligible for a #Junior Independent Savings Account# (JISA for short), which you can read about in more detail in our tax efficient investment blog. There is a limit of £3,600 per tax year which can be made up of cash or stocks and shares. Unlike the adult ISA, there are no rules on the split between these two types of investments. You should also consider utilising your own #tax efficient savings# as part of your overall planning strategy. Protect yourself Life Assurance and Critical Illness cover No one wants to think about the “what ifs”, but if the unexpected happens, you want your family to be in a position where they can live comfortably without you. Life Assurance is designed to provide a lump sum in the event of death, so your family would be able to continue to pay for life’s necessities such as your mortgage, school fees and the like. Another type of assurance is Critical Illness Cover. This is either a standalone product or one that can be offered in conjunction with Life Assurance. Critical Illness provides you with a lump sum in the event that you have a specified critical illness, so where you are unable to work because you are seriously ill it allows you the opportunity to fund all manner of things, this could be a holiday of a life time, respite care, pay off your mortgage, anything you’d like to help ease your situation.
Income Protection Income Protection does exactly what it says on the tin – it protects your income in the event that you are unable work due to serious illness, which means that a proportion of your income will be replaced to enable you to can fund the month-to-month necessities such as bills, mortgages, etc. Where there’s a Will, there’s a way With all this in mind it is also important to consider Wills. If you die without a Will, known as dying “intestate”, there are a whole barrage of issues that your family may come up against, including the length of time to settle all matters in the estate and for any money to be paid out, which can literally take years. By writing a Will you will have certainty over what happens to your assets when you die, whether this is your home or family heirlooms. We recommend you put Wills in place for the following main reasons:
You can decide how your assets are shared out - if you don't make a Will, the law says who gets what and this may not be the people that you think. For instance, being married does not necessarily mean your spouse would receive 100% of your estate on your death.
You can make sure you don't pay more Inheritance Tax than necessary.
It'll take longer to sort out your affairs if you don't have a Will. This could mean extra distress for your relatives and dependants until they can draw money from your estate.
Within your Will you can also appoint guardians of your children in the event that something was to happen to both parents, giving you peace of mind that your children will be looked after should such circumstances arise. A further benefit of having a Will is that you can put in place trusts to protect the financial future of your spouse/children. Sorry to get all morbid on you, but we would like to encourage you to think about all eventualities, because providing financial protection for your family should be high on your list of priorities. So there you go, a starter for ten on the cost of children and some crucial areas to consider when making plans for your family. If you’ve got any questions about this blog, please do not hesitate to #contact us# today.