Five financial planning tips for mums

Financial planning
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Sparing an hour or so to review your finances could make a big difference to your future. Here’s how to get started

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6 March 2023 | 3 minute read

Motherhood comes with so many responsibilities that it’s no wonder long-term financial planning often takes a back seat. Yet sparing an hour or so to review your finances and chat to a financial adviser could make a huge difference to your financial security.

Of course, managing your finances effectively is important for everyone. But as a mum there are lots of additional factors at play, which could mean your finances need more of a helping hand than your peers’.

To help you get started, here are five financial planning tips for mums.

1. Build up your emergency savings

As a mum, you’ve probably realised that emergencies can strike when you’re least expecting them to. While an emergency savings pot can’t prevent sick days, uniform mishaps or broken friendships, they can provide a useful financial buffer for more expensive emergencies like your boiler or car breaking down. Building up at least six months’ worth of essential expenditure in an easy-access savings account reduces the risk of going into debt or tapping into savings you’ve earmarked for longer-term goals.

2. Protect what matters most

If your family needs your income to help cover bills, childcare, school fees or after-school activities, it’s worth considering an income protection policy. This is a type of insurance that pays out a proportion of your salary if you suffer from a long-term illness and are unable to work. It could help you keep paying the bills so that your children’s lifestyle isn’t unduly affected.

Life insurance is another type of protection that could offer an important financial safety-net should the worst happen to you. It pays out a lump sum or regular income if you die during the policy term, perhaps helping to pay off the mortgage and alleviating some of the financial pressure on your family.

3. Focus on your pension

If you’ve taken time off work to look after your children, it’s really important to look for ways to top up your pension savings. Many mothers will put their kids’ futures before their own, but neglecting your pension could have long-term financial repercussions that ultimately affect your whole family. The good news is there’s still plenty of time to get your pension back into shape.

The first step is to protect your state pension. The full state pension is worth around £10,000 a year and while this alone isn’t likely to be enough to live on, it can take some of the pressure off your private pension savings. To qualify for the maximum amount, you need to have paid national insurance (NI) contributions for 35 years. If you’re not working, you’ll get NI credits automatically as long as you claim child benefit and your child is under 12. You can still receive these credits if you’ve claimed child benefit but have opted out of receiving payments (for example, because you don’t want to pay the high-income child benefit charge)1.

The next step is to consider topping up your workplace or private pensions. Pensions are a really cost-effective way of saving for retirement because of the tax relief you receive on personal pension contributions. This means a £100 pension contribution will only cost you £80 if you’re a basic-rate taxpayer, £60 if you’re a higher-rate taxpayer, or £55 if you’re an additional-rate taxpayer.

Even if you aren’t working, you can pay up to £2,880 per year into a pension, and you’ll still benefit from 20% tax relief, meaning your contribution will be grossed up to £3,600. If you receive any cash gifts or inherit some money, saving it into a pension could really boost how much money you have at retirement.

4. Invest in your kids’ future

If you can afford to do so, saving money for your children could make a big difference to their financial future, perhaps helping them to pay for university fees or a deposit on their first home. To give their money greater growth potential, it’s worth considering investing in the stock market. While you might be naturally risk-averse as a mum, history shows that over long periods the stock market performs better than cash. A Junior ISA is a great way to get started, as investment growth is tax free and the money is locked away until the child’s 18th birthday.

5. Get some smart advice

You might not have the time or inclination to sort out your finances on your own – and that’s absolutely fine. Finances are one area of your life where handing over the responsibility to someone else can be done totally guilt-free. In fact, getting some smart advice could help you feel confident that you’ve made the right decisions with your money, so you can get back to focusing on you and your family.

1https://www.gov.uk/child-benefit/what-youll-get

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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