Parental Financial Planning

In general parents tend to have less resilience than their child-less counterparts when it comes to everything from savings and debt, to how much surplus cash is left over at the end of the month. This isn’t just the case for lower earners, higher earning parents also have some gaps too.

Government Help

You won’t get child benefit automatically – you need to apply for it. If you or your partner earn £50,000 or over, you’ll have to pay at least some of it back through the High Income Child Benefit Tax Charge, and if you earn £60,000 or more, you’ll repay it all.

However, it’s still worth registering for the benefit, even if you opt out of payments. This means that if one of the parents doesn’t work while the child is under 12, they’ll get National Insurance credits that will count towards their State Pension.

From three years old, children will also get 30 hours of free childcare, as long as their parents work more than 16 hours a week and earn less than £100,000. From April 2024, working parents of two-year-olds will also get 15 free hours. Then from September 2024 that will be extended to all children aged nine months and over, and from September 2025 it will be increased to 30 hours.

If you’re on a low income, you might also get childcare payments through either tax credit or universal credit. You might also be able to use tax-free childcare, so for every £8 you spend on childcare, the government will top it up by £2.

Protection

Make sure your will is up to date – including establishing guardians if something was to happen to both parents.

Make sure you have enough life insurance, so they’re financially cared for if you pass away, and check sick pay. If it’s not very generous, you could consider income protection, which can provide cash for you and your family if you’re not able to work for a period.

You also need to revisit your emergency savings. We should all have a savings safety net of three to six months’ worth of essential expenses in savings we can access easily while we’re working, in case of nasty surprises. When you have children, your essential expenses will increase, so you need to build your nest bigger.

Junior ISA

If family and friends want to buy a present to celebrate your child’s birth – or for birthdays or celebrations – you can ask them to pay into the Junior ISA (JISA), and help build up a nest egg they can access when they turn 18.

You can choose between a Cash or Stocks and Shares JISA. Parents might worry about investing, because they see it as too risky. However, over an 18 year timescale investing has tended to offer far more potential for growth than cash savings. Unlike the security of cash, all investments will go up and down in value, so your child could get back less than invested.

To ensure you are optimising your family finances for this year and beyond, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]

This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.