If you’re dealing with a sea of nappies or have a boisterous toddler demanding all your attention, organising your finances might be the last thing on your mind.
But, as our recent survey discovered, kids can be a lot more expensive than you realise. From eye-watering childcare fees to a seemingly never-ending need for new shoes, you may feel like there is very little left at the end of each month.
The good news is that it’s possible to take control of your money with a little careful planning. And, with some expert help, it could put you and your family on the path to a more secure financial future.
Here are five tips to help you get started.
1. Create a budget – and stick to it!
We’re all guilty of frittering away money on things we don’t really need. Unfortunately, these costs can soon add up and leave a real dent in your wallet.
Creating a budget is a great way of ensuring you’re not overspending. The first step is to add up all your monthly outgoings and then compare this with your monthly household income. As well as obvious expenses such as nursery fees, school fees, your mortgage and utility bills, make sure you include things like after-school clubs, trips to the cinema, new clothes, stationery, and gadgets.
If your outgoings are higher than you expected, see if there’s a way to cut costs. This could include switching to a cheaper energy deal, cutting down on takeaways, or cancelling an unused gym membership (let’s face it, not many parents have time to go to the gym anyway!). You could also consider buying your kids second-hand toys and clothes instead of new ones – they’re a lot cheaper and are often barely used.
Once you’ve calculated your income and outgoings, you can set a realistic spending and savings budget. To help you stick to it, consider unsubscribing from tempting promotional emails and giving yourself 24 hours to reflect before clicking on that ‘buy’ button.
2. Build up your savings
Saving money each month not only improves your financial security but can also be a real boost to your mental wellbeing. You can get real peace of mind from knowing you’re doing all you can to increase the chances of a solid financial future for you and your children.
The first step is to build up your emergency savings pot, which may have taken a hit when you kitted out your child’s nursery. It’s a good idea to have around six months’ worth of essential expenditure in an easy-access savings account. This money could help you through a bout of unemployment or pay for emergency repairs to your home, without having to resort to loans or an overdraft.
Once you’ve built up your rainy day fund, it’s time to start thinking about your family’s longer-term finances.
3. Make your money work harder
If you leave all your money in a savings account, there’s a risk it could lose its real value over time. This is because the rate of inflation is currently higher than most interest rates on cash accounts.
To make your money work harder, you might want to consider investing at least some of your spare cash in the stock market. Investing gives your money the opportunity to increase in value over time, which means you could reach your goals faster – whether that’s paying for your child’s university tuition or helping them get on to the property ladder.
The stock market can be volatile, so you’ll need to be comfortable with committing your money for at least five years, ideally longer. This will give your investments the chance to recover from any market downturns.
Investing isn’t something you want to get wrong, so if you’re at all unsure, speak to a financial adviser.
4. Give your kids a financial head start
Many parents want to give their children a financial head start in life, especially in light of soaring house prices and a more uncertain jobs market. You might not realise it, but you could build up a surprisingly large pot of money for your child by investing small amounts of money into a Junior ISA each month.
If you invested £600 a year – the equivalent of £50 per month – from birth until your child reached age 18, they could amass a pot worth £17,723, assuming a return of 5% per year after charges. Of this amount, £6,923 would have been generated by investment growth. If you were able to double your investment to £1,200 per year, or £100 per month, your child could have an even more substantial £35,447, with £13,847 of that generated by investment growth.
These are illustrative examples and you need to remember the stock market goes down as well as up. However, history shows that shares tend to perform more strongly than cash over the long term, thereby boosting your chances of building a secure financial future for your children.
5. Protect your family against the unexpected
Have you ever thought about how your partner and children would cope if the worst were to happen to you? Death and illness are horrible subjects to think about, but they can cause severe financial hardship for families who haven’t planned ahead.
Life insurance, critical illness cover, and income protection are some of the solutions that could help you and your family through tough times. Policies vary enormously from one provider to another, so it’s crucial to speak to a financial adviser. They will be able to explain which type of protection suits your needs and budget.
Taking control of your finances can feel daunting, but sticking your head in the sand isn’t the answer. The impact it can have on you and your children’s long-term financial wellbeing makes it well worth doing, and it’s not something you want to get wrong. Taking some really good financial advice could make a real difference to you and your plans for the future. So why not speak to one of our financial advisers today?
The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy.
Are you on track for a secure financial future?
Start talking to us today about your future financial plan and we can help you make sure it is a resilient one.Book free consultation