A growing body of research is showing that more people are increasingly worried about their personal finances. Throw in the costs of raising children and the number of people, relatively speaking, that worry about money is higher.
Loughborough University release data each year, which for 2018, shows that the cost of raising one child to the age of 18 will cost couples in excess of £150,000, for a single parent this rises to over £183,000.
With changes to the benefits system more parents are finding it increasingly challenging to meet their family’s needs. The biggest financial burden for families is the cost of housing, rents, council tax and utilities – all of which tend to increase at a higher rate than most people’s income.
My top tips for parents to get their finances into good shape are:
1. Start with a budget
Not just a paper budget of your income vs direct debits, really drill down to where your money is being spent. If you have to, do it the old fashion way and sift through your statements. Yes, it might take a bit of effort and a couple of hours, but it will be well worth it. Most people I have worked with always underestimate what they truly spend.
2. Spend Smarter
See where you can make savings without changing things too much. For example, most people still do not shop around for their utilities, phone/broadband deals, tv packages, home and car insurances. Often bundling packages can bring savings. Utilities are getting easier to compare. Put a notification on your phone to let you know when your current deals are expiring, so you don’t forget and shop around. If you fall outside your contract you’ll generally end up paying more. Even switching supermarkets has proven to have cost savings with little to no difference in the taste of your food.
3. Is it a ‘Need’ or a ‘Want’?
When it comes to spending on any item, always ask this question first: Do I really need it now? This one question has enormous power to change your financial wellbeing. Even though you might convince yourself you ‘need’ something, by delaying this with ‘now’ will allow you to put off the spending and research shows that by doing this you’ll end up spending less on impulse purchases that you won’t even miss.
4. Plan ahead
Once you have a disciplined approach with the above, which may take a few months before it becomes habit, you should start to notice the financial and personal benefits. Removing money worries has a huge impact on wellbeing and having some extra savings can help to start planning ahead. I would highly recommend everyone has a ‘rainy day’ fund saved up to provide for those unexpected things that crop up from time to time. The usual recommendation is between 3-6 months of outgoings and this is a sensible place to start. Simply having one in place will help you to feel better and prevent you from getting into debt.
5. What If?
Once you have sorted this out, before thinking about retirement planning, think ‘What if….?’. What could ruin this entire plan that you’ve worked hard to build? Usually, this is something serious and unexpected like ill-health, or losing your job, that may prevent you from earning or even early death. Having dependent children is all the more worrying, who will look after them and how will they afford to do so?
Speaking to an independent financial expert can help you with point 1 above – Budgeting, and will help you with point 5 – the ‘What If ‘ scenarios in the following way:
- To identify what shortfalls you have
- Source the right insurance policies for you within your budget
- Help you through the underwriting questions
- Make sure the policies are held in the right name
- Help to ensure the policies are held in trust to make sure they benefit your loved ones at the right time
The peace of mind this affords is greater than any other insurance. I would much rather know that my children will be financially looked after than if I can replace my smartphone if it breaks.
Let us know what financial concerns you have as a parent – email email@example.com.