It’s easy to forget to take care of yourself when you have children – naturally, they come first. But when it comes to personal finances, there are certain things you shouldn’t put off, such as sorting yourself out with a pension or making sure you take out life insurance to protect the family, should the worse happen. Here, we outline the top five financial moves every mum should put on her to-do list, without delay.
1. Get a pension
When it comes to saving for old age, women are at the highest risk of pensioner poverty. Recent research from Aegon revealed that men have almost three times the pension savings of women with an average pension pot of £73,600 compared to woman’s £24,900. If you are working, then join your workplace pension scheme – by opting out, you are essentially saying no to free money, because when you pay in, so does your employer. You also get tax relief on your payments, which is another slug of free money.
You are entitled to employer contributions if you earn over £5,876. If you earn over £10k, you will be automatically enrolled onto a pension scheme. You can opt out, but it makes financial sense to stay in.
If you are self-employed, or even a stay-at-home mum, then saving for a pension is still important. If you have no earnings, ask your partner to contribute into a personal pension arrangement for you – it is only fair if you are taking on the majority of childcare. If self-employed, arrange a personal pension arrangement and contribute regularly, as you will still benefit from tax relief.
If you have a child under age 12 and are not working, or don’t earn enough, make sure you claim child benefit, even if you are not entitled to all of it. Claiming child benefit means you will get national insurance credit, which then counts towards your state pension. You only get a full state pension if you have 35 years’ national insurance contributions.
2. Take out life insurance
According to research from Legal & General, the value of a mum is around £30,000 – this is what it is estimated to cost if you had to pay someone to do the job a mum typically does when it comes to looking after the family. If you suddenly died, how would your family cope?
Dying unexpectedly is not something we like to think about, but sadly bad things happen and if they do, life insurance can give you piece of mind that your family will be protected financially. Life cover costs as little as £5 month and you can also add critical illness cover to your policy; it could provide an essential financial safety net for your family.
3. Make a will
If you have children, then making a will is important, especially if you want to have a say in who will look after the children and take care of your possessions and property – this is known as your estate.
Without one, your family could face a financial nightmare. For example, if you are not married, then your partner may not get anything from the estate and possessions may not be distributed in the way you wish.
Writing a will can also reduce inheritance tax that might be payable. Currently, anything valued above £325,000 is subject to 40% inheritance tax, but this can be reduced with careful planning, making use of trusts and using gifting allowances.
4. Top up your ISA
Currently, you can save a whopping £20,000 into a tax-free ISA, so make the most of this allowance. You can start saving into an ISA from as little as £1 – either into a cash ISA, which pays a set interest rate, or an investment one. Try to save a regular amount each month or pay in a lump sum whenever you can.
If you don’t think you will need access to the savings for at least 10 years, then consider an investment ISA, where the return potential is higher. But remember, investments are not risk-free and you may get less than you put in, which is why it is important to invest for 10 years or more. There are plenty of investment guides here.
5. Switch service providers
Switching service providers such as broadband, phone, gas, electricity and insurances could save you hundreds of pounds a year. If you haven’t switched services for a while, then it’s time to review them to get onto a better deal. Many companies will offer new customers significant discounts, but these usually only last for a year, so when the deal expires, you should ditch and switch. This is particularly true of broadband, TV and phone packages.
It’s also important to shop around, for example, if the car insurance is up for renewal; don’t just accept the renewal quote – find a better deal and ask the current provider to match it or move. Make sure you cancel any auto renewals to avoid paying twice.
Last but not least, if you look after your own savings & investments, make sure you’re getting the best deal on your platform. To find out more run the platform calculator.