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Financial planning: how to best prepare for your family

5 min read

Financial planning: how to best prepare for your family
Raising a family can be difficult and costly but ultimately very rewarding. While financial planning for your family sounds intimidating, it’s easier than you think as you know what the key milestones will be.
We look at how to best plan for each milestone, whether it’s the birth of your first child or your youngest leaving the nest.

Make a will

As soon as your first child is born, it’s essential that you make or update your will to protect them in the event of your death.
You should update your will for each child that you have.

Build up savings for your children

When it comes to savings, children have time on their side.
You should open a Junior ISA (JISA) for your child as soon as possible, paying into it regularly if you can.
Thanks to compound interest, which is interest you earn on interest, over the years, you can build a substantial nest egg by the time your child goes to university.
You can choose from a cash or a stocks and shares JISA.
It’s a good idea to talk to a financial adviser about which type of JISA is right for you.
Cash is often seen as the safer option, but your money can be eroded by inflation.
A stock and shares JISA can deliver greater long-term growth, especially if you leave the money untouched for a long time, although there are some risks to consider.
Some parents look even further ahead and set up pensions for their children.
While this is an unusual approach, it can deliver some impressive results for those who are willing to wait.
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Saving for your child’s education

As soon as your child is born, you know they will be starting secondary school in 11 years’ time – and this time can fly by.
A fixed milestone like this is useful for investors as it gives a definite target to work towards.
Remember that even state-funded education can be expensive as you have to cover uniforms and school trips, so it makes sense to start building up a ‘school fund’ as early as you can.
Similarly, you should look at setting up investments to help fund your child’s university or college education.
This is considerably more costly, but you have much more time, so you may not need to pay in as much as you think.
Whether you’re saving for school or university, a financial adviser can recommend the right investments, so your money can achieve maximum growth and is ready when you need it.

Should you extend your home or move?

One of the big costs of having children may be the need for more space as the more kids you have, the more rooms you’ll need.
Long-term planning is vital. You should think about how many children you want as you don’t want to often move.
Location is also key as you may want to consider school catchment areas.
Ideally you should be looking for your home for at least the next 10 years, so talk to a mortgage broker to see how much you can safely borrow.
If you love your home but need more space, an extension may be an option. Remortgaging can help you free up the funds for any work.
An adviser may be able to find a deal that lowers your repayments or keeps them the same, so you can add space and value to your home without any immediate extra costs.

Financing higher education

If you’ve invested in your child’s higher education, then you should monitor your investment portfolio carefully in the last few years and consider safer assets.
A financial adviser can help you with this strategy.
If your child also needs a student loan, this only needs to be repaid once they start earning a certain amount.
Paying off a student loan early is not usually recommended, so a lump sum may be better used in savings or investments.
If you have the money, one way to help your child is to buy them student accommodation as they could rent out other rooms to pay the mortgage and save on their own living costs.
The property itself may also become a useful investment for the future.
mortgage broker can help you find the best deal for your property.
If your child will soon be leaving the nest, they may find our guide to leaving home for the first time useful.

Helping your child buy their own home

One of the biggest steps of being a parent is helping your child buy their first home.
This is more difficult than it used to be due to soaring homeownership costs and higher property prices, so young people are likely to need additional help.
There are many ways to help your child get a mortgage, which do not involve handing over large lump sums.
You might even be able to help them onto the housing ladder while they’re at university, and squeeze extra value from the money spent on education costs.
It’s a good idea to talk to a mortgage broker or independent financial adviser about the best way to help your child buy their own home.
Image of a lady handing a couple keys to a new home

Managing family inheritance

You should ensure your will is updated regularly to make sure your family is taken care of after your death.
As you enter later life, you should think more about inheritance planning, and whether or not your family will be exposed to inheritance tax in the event of your death.
This kind of planning is continuous, so talk to an adviser while you still have many healthy years ahead of you.
With advice and planning, you can manage your estate to minimise any future inheritance tax bill.
Find out more about later life planning.

When a family member dies

A death in the family is always a major upheaval. Not only is it an emotional time, it can also have a big financial impact, particularly if the person who died was the main or sole earner.
If you have a mortgage, you should make sure you have life insurance to pay off the loan, if one of the mortgage holders dies.
You will also have to arrange the funeral for your loved one and decide how you want to commemorate them.
Finally, you will need to find out what bereavement benefits you may be eligible for.
If you’re feeling overwhelmed by financial planning, you’re not alone.
Unbiased can match you with a local financial adviser who can guide you through the process to ensure your loved ones are taken care of in the event of your death.
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