Not enough households are saving for a rainy day – and that’s why women in particular, need a financial backup plan.
New research from Scottish Widows has revealed that 1 in 5 households would not be able to maintain financial stability if the main earner lost their income.
Although we don’t like to think about it, any number of factors can lead to yourself or your partner losing their salary. Redundancy, serious injury or a long-term illness can all render you out of work for considerable periods of time.
Ideally, you should be able to survive being out of work for six months without it putting you into financial dire straits – but this is not the reality for most women.
To protect your household responsibilities, you need a financial backup plan in place. There are simple measures you can take to increase your financial stability – these include:
Start saving – even putting away a very small amount each month will help you to build up a nest egg. You need to strike a balance between having enough to cover your means, and saving enough to cover you in the event of a financial emergency
Look at where you can make cutbacks – in order to fund this financial backup plan and start saving more money, look at where you can adapt your lifestyle to reduce your spending. This could include limiting takeaway coffees to once a week, cancelling the gym membership you never use, or switching to a more competitive energy provider
Define what constitutes a financial emergency – once you start building up your savings, do not be tempted to dip into it for non-essential reasons. It is not a holiday fund or an excuse to treat yourself!
Take out critical illness cover – this is an insurance policy which will pay out money to you if you are unable to work as the result of a serious illness
Consider income protection insurance – in addition to critical illness cover, some households also take out income protection insurance. The number of circumstances covered varies between policies, as does the way in which they are paid out, so sometimes it can be beneficial to possess both critical illness cover and income protection, because these cover the broadest range of scenarios
Make a will – this way, if the worst happens, you know that your partner and children will be protected. Without this legal document, there is no guarantee that your estate will be divided the way you want, amongst the people you want it to go to
Get a life insurance policy – similar to the will, life insurance will protect your family financially in the event of your death
The idea of creating a financial backup plan can be daunting for many women, especially when you need to consider factors such as finding the most competitive savings account, choosing the right insurer, or writing a will that will protect your loved ones when you are no longer around.
Thankfully, our financial experts have vast experience in helping women in all financial scenarios and stages in life to plan for the future, including creating the financial ‘cushion’ needed to support you should there be a bump in the road.
When you need to think about your financial plan, contact us to arrange your own financial review.
The financial conduct authority does not regulate wills, taxation and trust advice.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
The value of investments can go down as well as up and you may not get back the amount invested.