Family finances for Father’s Day
Happy Father’s Day to all the dads reading. I love being a dad, and even as an experienced financial planner, raising my kids Olly and Bella has taught me plenty about family finances.
On average, a couple spends just over £75,000 raising a child from birth to 18 years old according to the Child Poverty Action Group. That doesn’t include housing or childcare costs, which can double the amount.
It’s no surprise that raising kids comes at a cost, but it’s also an opportunity to learn – for children and parents.
Lifelong lessons from pocket money
Pocket money is a brilliant way to start teaching children about finances. With a few simple systems, you can give your kids an education they won’t get at school.
First, base the amount they get on their age, say for example £2 per month for each year of their age, so a 10-year-old would receive £20 per month. This keeps things simple.
Second, split their needs and wants: you buy what they need, and they buy what they want. This gets them to manage their own money and helps them to understand its real value.
Third, link pocket money to doing chores, like taking out the bins or tidying up. This teaches kids that we have to earn money, it’s not given for free.
There’s more on this at my website www.warrenshute.com
Childhood is also a great time to start a habit of investing for the future. On their birthday each year, discuss buying a single share in a company they know and like (this engages them more), and watch how its value changes and grows over time. This isn’t the best investment strategy because of all sorts of reasons, but it’s a great lesson.
If you don’t want to actually buy the share, you can also do it virtually, noting down the share price on the birthday and comparing it 12 months later, or set up a free virtual account at www.londonstockexchange.com
Protect your income
Insurance might not be your idea of family fun, but it’s so important. If you have children, I believe a Family Income Benefit plan is absolutely essential to protect your family from the loss of your income, if the worst were to happen. It provides a tax-free payment to your family in the event of premature death, replacing your salary and it’s often less expensive than straight term assurance.
Make a will
Wills are not just for when we get older. If you have dependent children, you must make a will. Yes, it’s a legal document that tells people what to do with your estate and belongings when you pass – but much more importantly for parents, it details who should care for your children.
If both parents pass away without a will then social services will step in to look after their children, at a time when the kids want and need to be with people they know, trust and love.
For more information and money planning ideas search for the Money Planner podcast.
5 Lessons my father taught me
Here are 5 lessons my dad taught me that have always stood me in good stead:
- Money doesn’t grow on trees.
- Hard work never killed anyone.
- Waste not, want not.
- Save for a rainy day.
- Look after your pennies and your pounds will look after themselves.
And here are 5 lessons I teach Olly and Bella:
- Just because you can buy something, it doesn’t mean you should.
- Always keep and invest at least 10% of your income; your future self will thank you.
- Be grateful for what you have, there is always someone with more and someone with less than you.
- If it seems too good to be true, then it probably is.
- Save up, don’t use credit. When you wait for something, you will appreciate it more and know you truly want it.