Planning a family from a financial perspective - saving, investing and debt planning for young families - Evolution Financial Planning

Starting a family is one of the biggest financial commitments you can make and if you don’t plan accordingly, family finances can quickly become overwhelming and stressful. Obviously, everyone is in a different situation when they start a family and some people will have more time to plan than others. But if you do have the luxury of time then I would urge you to think about the financial requirements of children and families in advance. In this article, I will outline the main financial milestones of family life and how to go about preparing for them.

Budgeting for young families – having a baby

Having a baby is the first major financial milestone of family life and establishing a weekly family budget is an excellent way to preemptively reduce stress. You don’t want to be caught off guard by any costs or expenses when you are first starting a family. As you will probably already have a lot on your plate to deal with. Budgeting effectively will remove some of the anxiety associated with not knowing. It will also prevent a situation where you have already started a family and then come to realise that you cannot afford the expenses of family life.

If you’re not sure how to start budgeting as a young family, the easiest way is to figure out a budget that the whole family can comfortably live off in a week. Then the next step is to find out exactly where money is coming in and out. Just these two steps alone can make a big difference to how stressed you feel about your finances. You should also prioritise your spending wherever possible. Decide what the necessities are and try to avoid spending on anything else too often.

When planning your family budget remember to account for times of the year that are usually more expensive. Christmas and birthdays are the main ones you need to stay on top of as you’d be surprised just how much they can increase your spending. As a final measure you could also look at what your maternity/paternity pay is compared to your normal wage. This way you can plan ahead and if you’re financially prepared then family life shouldn’t feel as hectic.

Planning ahead for young families – childcare, starting school and emergency arrangements

Working out your family’s weekly budget is only half the battle I’m afraid. You will not be on maternity leave forever and so most people will need some kind of childcare plan in place for going back to work. Even if only one parent is planning on going back to work to begin with, you should still have an emergency childcare fund just in case.

After childcare your next immediate priority should be your child starting school and the financial implications of this. Will your child attend a state school or do you want to pay for private education? The latter will require a lot more financial planning due to the significantly higher costs. However, both private and state school pupils will need money set aside for things like school uniforms, stationary, PE kits and fees for extra curricular activities.

You should also be thinking about your will. Now I know you might be thinking this can wait but if you haven’t written your will you should do this as soon as your first child is born and then update it with every new child. Remember it is always useful to be prepared in case of a disaster. Knowing that you have a financial plan in place for emergencies will give you peace of mind.

When planning your finances as a young family you might also want to think about setting up a junior ISA for your child. If you set this up when your child is born and add to it consistently then your child will benefit hugely from the effects of compound interest.

Do you have enough space for your new family?

You definitely want to be thinking about space and if you have enough of it to raise a child. Moving house is not something you want to be doing with a newborn if you value your sanity. So any concerns about space and your home should be addressed before the baby arrives. If you think that you will need more space, address this as soon as possible and set your mortgage as priority in your finance plan. Ideally you’ll want to be living in the same place for at least the first ten years of the child’s life so it can be great to see a mortgage advisor for specialist advice. A mortgage is likely to be the biggest financial commitment you will ever make. So get it right the first time with expert mortgage advice from Evolution Financial Planning.

Saving, investing and debt management for young families

Saving money for the future and investing your money to grow your wealth is so important as a young family. You will have a long time between the last milestone we discussed – starting school – and the next major milestone of starting university. Use this time wisely because most university students require at least some financial support from their parents in the first year or so and accommodation is never cheap! Use a budgeting strategy to help you figure out how much you NEED to save and what you can AFFORD to invest.

Investing is a great way to grow your wealth without too much effort on your part. However, if you want to have a positive impact on the world for your children’s sake, consider investing ethically. If you don’t know where to start with ethical investing and you’d like some guidance, have a look at this FREE ethical investment guide.

One of the best things you can do for your finances but also your mental health is to save some money for an emergency fund. This means that if the worst case scenario happens and you experience a severe slash to your income, you will have a financial safety net to fall back on. Then if you don’t need the emergency money and the opposite happens, you have a nice rainy day fund to dip into.

It should also be a priority for your family to set up life insurance for the main earner of the household. I know it can be grim to think about situations like these but if something terrible does happen then added financial stress is only going to make a stressful situation worse. On a cheerier note, you should also set aside some money in a family pot that exists purely to fund fun family activities! This will give you more reasons to be excited about your new family.

Being in debt is not always a huge problem (depending on severity, obviously) and it shouldn’t hold you back from having a family. I already discussed the importance of budgeting, however this is vital if you are in debt and plan to clear it. You should meticulously track your spending in order to get on top of your finances. Date, amount, item etc are all variables that need to be tracked if you want to minimise the impact of debt on your family.

Planning is essential for young families, don’t stress yourself out! 

Starting a family can come with a mixed bag of emotions. On the one hand you’re so excited to live life with your new beloved family. But on the other hand you’re stressed. There are so many things you can stress yourself about when starting a family so don’t let money be one of them!

If you want to get on top of your finances before starting a family, seek advice from the experienced female financial advisors at Evolution Financial Planning.

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