How to Create a Family Financial Plan

Raising a family can be incredibly rewarding, but it is also a time when many people face increased financial pressure. You may still be paying off debt or trying to get on the property ladder, while simultaneously doing everything you can to build a career and give your children the best start in life. You might also have ageing parents who are becoming more reliant on you.

As years pass, your thoughts may turn to retirement or passing on assets to the next generation.

Making a plan early on can remove some of the anxiety around money, and leave you free to enjoy time with your family.

In this guide, we outline the main points you may wish to consider:

Know Your Budget

Family life can be expensive, and children are not always the most understanding when it comes to making decisions about money.

Making a list of your income and expenditure can help to get you started with your budget.

If you are spending more than you earn, you are storing up a problem for the future and need to take action. This might involve cutting back on spending, shopping around for deals, or looking at ways of earning extra money.

You may find that you are earning more than you spend, in which case you should find a use for the extra money. Building up your emergency fund, increasing your financial protection, topping up your pension, or even spending the money to improve your family’s lifestyle could all be good uses of the cash.

It is much easier to create a plan when you know your starting point.

Set Your Priorities

The next step is to establish where you would like to be in the future.

Firstly, you need to set some goals. A family holiday could be a reasonable starting point, but try to think longer term. Ask yourself the following:

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When would you like to retire, and how much do you think you will spend?

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What kind of support would you like to offer your children? Do you want to fund their education and first home deposit, or is it more important that they learn independence?

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Do you need to move to a bigger house, or carry out improvements to your current home?

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Is there anything else you would like to achieve?

Once you see your goals written down, it should be easier to prioritise them. You will need to decide which ones you feel most strongly about.

Prepare for the Worst

Before you even start on the path towards achieving your goals, it may be sensible to put some protective measures in place. A strong financial plan does not crumble when faced with unforeseen events, as contingencies are already built in. The risks you should consider are:

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Short term unplanned expenses – start saving towards an emergency fund so that you don’t need to reach for the credit card whenever something goes wrong.

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Illness – even with an emergency fund in place, you may need to consider the longer term. Income protection and critical illness insurance can help to replace earnings and cover additional costs if you become unwell and can’t work.

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Unemployment – keep your skills and CV up to date and keep in touch with people throughout the industry. Make sure you know your rights if faced with redundancy or dismissal.

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Death – it may be worth considering whether you have adequate life insurance and that your Will is up to date.

While these issues are unpleasant to think about, imagine how much easier life will be for your family if you plan ahead.

Funding Your Goals

With the basics covered, you can now start putting your money to work for your future lifestyle. The best option for saving will depend on the goal and when you would like to achieve it.

For example, for shorter term goals such as holidays or home improvements, cash savings are the best option as they won’t fluctuate in value.

For any medium-term goals, e.g. within the next 5-10 years, you may want to consider some low to medium risk investments (for example, within a Stocks and Shares ISA), possibly with some term deposits in addition.

Investments with higher equity content may be better suited to longer term investing, for example planning for retirement. This may apply to your pension as well as any other investments with an investment timescale of at least 10 years.

However, everyone’s attitude and (more importantly) capacity for risk are different and it is crucial that you are comfortable with the levels of risk  before investing. A financial adviser will be able to devise investment strategies which are specific to your varying financial goals and objectives.

Passing on Wealth

When you have a young family and every penny is accounted for, passing on wealth might not seem like a priority. But there are things you can do now to future-proof your plan.

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Consider placing life policies and death in service benefits into a Trust. This allows easier access for the beneficiaries and the money is not usually subject to Inheritance Tax.

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Consider making (or updating) your Will.

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Consider nominate someone to receive your pension funds in the event of your death.

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Consider obtain legal advice regarding the best way to structure any business assets.

Every family is unique. Whether you are starting to save for the first time or creating a succession plan for a multi-million-pound business, a financial plan can help you protect your family’s interests.

Please do not hesitate to contact a member of the team if you would like to find out more about financial planning.

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Please don’t hesitate to contact a member of the team to find out more about financial planning.