Having a baby is very exciting, but it’s also a huge financial commitment. When you first have a baby there are many things to think about and you should not let your finances take a back seat.
You are likely to experience a noticeable drop in income when you have a baby as you may be navigating how to manage on maternity pay or you may be considering dropping your hours once you return to work.
Below are five financial steps you should take to protect your new family.
Review your income and expenditure
A good place to start when it comes to managing your finances after having a baby is to review your income and outgoings as they are likely to have changed significantly.
You should group together your essential and non-essential outgoings and look at ways you can cut back on the non-essentials.
You will also find that you may have to make several expensive one-off payments for items such as a pram or car seat, however your day-to-day expenses may reduce as you are likely to cut back on socialising.
It is also worth considering future budgeting and factoring in new expenses such as childcare. This will enable you to plan in advance, so you are not faced with large, unexpected expenses. Planning ahead will make sure that you stay on track to meet your short and long-term goals.
Don’t exhaust your emergency funds
Managing your finances can be stressful when your family is growing. It is important to keep a sufficient emergency fund in place and not to exhaust all of your savings. We recommend that your emergency fund covers 6-12 months of your essential expenditure. This provides financial security for you and your family in case the unexpected were to happen such as redundancy.
You may need to reassess the amount in your emergency fund based on your new expenditure and budget as this might have changed now you have started a family.
An emergency fund is particularly important if you only family relies on one parents income.
Reassess your protection and insurance policies
If you have any existing insurance policies such as life insurance, you should review these after having a child. You should check if the level of cover is still appropriate and if the amount that would be paid out is sufficient for your new family.
If your family is reliant on one person’s income then it is particularly important to also consider income protection. Income protection will provide the level of income that you select if you are unable to work for any reason. This will give you peace of mind knowing that your family will continue to be provided for if you were to fall ill.
Having the correct level of protection in place will provide you with peace of mind and financial security even in times of uncertainty or if the unexpected were to happen.
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Create a Will or Review your Existing Will
A Will is an important document that dictates who benefits from your estate when you die. Having a Will in place is the only way to make sure that your assets will be distributed to the people you choose at the time you feel is appropriate for them to receive it.
For parents, you can also assign a guardian in the Will to look after your children if you were to die before they reach the age of 18. If you do not appoint a guardian in your Will then their guardian would be decided by the court which is a long, stressful process for your children and may cause friction between your family members.
If you already have a Will in place it is important to review it as soon as possible to make sure that your new child is included in the Will.
Please note that advice relating to a Will would necessitate the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.
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Start a Junior ISA
The earlier that you start saving for your child’s future, the more time your investments have to possibly grow in value. Saving each month or a lump sum each year can add up to a large amount over a long-time period.
A Junior Stocks and Shares ISA is a tax-efficient way to invest on behalf of your child. A Junior Stocks & Shares ISA must be opened by a parent or guardian. Once it has been opened, anyone can contribute up to a maximum total of £9,000 per tax year. Any investment growth held within the Junior ISA is free from income and capital gains tax.
Review your family’s finances
A financial adviser at Four Wealth Management can help you to manage your finances as a new family.
Book a no-obligation meeting now to make sure that you have the right level of protection in place to provide your family with financial security.
Book now or call us on 0117 973 0500
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief generally depends on individual circumstances.
