Financial planning for parents
Financial planning is important for all of us, but if you have children you might be planning for their future as well as yours. The cost of raising a child in Britain now stands at around a quarter of a million pounds, thanks to child care, tuition fees and all the aspects of running a home. Staying on top of everything while also planning for your child’s future can be challenging, but there are plenty of online resources that can help you.
Organising family finances
A recent study concluded that the average cost of raising a child in Britain was £231,843 – up by 65% since 2003. The average UK parent will have to spend over a third of their take home pay to raise a child to adulthood, with the steepest bills coming when the child is between one and four years old. Researchers found that child care and babysitting alone will set the average family back £70,446.
A good first step in reducing anxiety about general expenses is to know what you’re spending. You’re less likely to be overwhelmed by a bigger-than-expected bill if you know it’s coming. Taking control of your personal finance budget can bring peace of mind. While you’re balancing the books, you might also want check to see that you’re getting the best out of your chosen savings account.
There are also products designed for individuals to save for children to access when they grow up, such as a Junior Individual Savings Accounts (ISAs). Junior ISAs come in two types. With a cash Junior ISA, a certain amount can be saved each year without being taxed. Control of the account will transfer to the child when they turn 16, but they won’t be able to take any money out until they’re 18. With a stocks and shares Junior ISA, cash is invested, and no tax is paid on any growth or dividends received.
Saving for University and tuition fees
A major concern for many parents will be the cost of putting their child through university. In Britain, tuition fees now cost up to £9,250 per annum, pushing the cost of a three-year course up to £28,000. A recent study found that anxiety about debt arising from tuition fees had risen among some middle-class and low-income families.
There are various kinds of financial assistance available to help with fees and living costs, including Tuition Fee Loans and Maintenance Loans. You’ll find details of student finance options on the government’s website, including how to apply. UCAS also has a wealth of information on managing fees and loans.
Financial planning for inheritance
Making a will becomes particularly important when you have children. As well as allowing you to appoint a legal guardian for your children, a will helps ensure that your estate – your house, savings or other assets – is divided up clearly and according to your wishes. If you die without making a will – known as ‘dying intestate’ - your estate will be distributed by the state according to a pre-determined set of rules. As a result, your children may not automatically inherit your estate, even if you’re in a marriage or civil partnership.
While anyone is entitled to write a will themselves, The Law Society recommends that you employ the services of a solicitor to do so. There is also the option of using a will writer, but check that they are a member of Institute of Professional Will Writers or the Society of Will Writers.
A will may also ensure that you don’t pay any more Inheritance Tax than you rightfully owe. Inheritance Tax is collected by the UK government after a person dies, but doesn’t affect most people as it only applies to estates larger than £325,000. However, that non-taxable threshold increases to £425,000 if an estate is passed on to children named in a will. You can see how your estate would fare with this Inheritance Tax Calculator.
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