Nothing can prepare you for becoming a parent for the first time. But once the new arrival has settled into your family life, it is imperative to take some time out to ensure you have all essential financial avenues boxed off. Here are some of the main action points I advise my clients to do when they become parents. 1) Review your life cover When it was just myself and my wife, we were happy with the bog-standard Mortgage Protection Plan, whereby the mortgage would be cleared in the event of one of our deaths. A more substantial conversation and examination is needed once you have children. If you or your spouse were to die, your mortgage would be gone, but so is that person’s income. If the spouse were earning €50k per annum and died at age 40, for example, they would have earned €1.25 million had they reached age 65. What will replace that income in the home? How much money will be needed to replace that income to raise your child/children? Your financial planner will use a life cover calculator to help you establish what you need and the corresponding cost. The younger you apply for this cover, the cheaper it is, so look at it sooner rather than later. 2) Start an Education Savings Plan According to Zurich Life, the cost of putting a child through full-time education can range from €28,884 to €66,152, depending on where the student lives*. This is a massive amount of money to have available if your child decides they want to attend third level. I recommend, where possible, saving something every month from when the child is born to build up a nest egg that will be there to allow for this. Many of my customers box off some or all of their children’s allowance (see rates for 2024 below) if their circumstances allow it. As it is a long-term savings plan, it is vital to save it into a vehicle that will give you a level of return that will at least beat inflation to protect the value of the money. A good Financial Advisor will show you the range of options available for college savings plans from the various Life Assurance companies in the market. 3) Make a will According to a survey by Irish Life**, 71% of the respondents did not have a will. But why does it matter? If you don’t have a will and you die, you die “intestate”. Your estate will be distributed under provisions of the law of intestacy – and this might not be in the way you would have wanted. Making a will gives you peace of mind around the following areas; -Assets and Liabilities: what are they, where are they, and ultimately who will get them? -Minor children: who will be their guardians and trustees in the event of both parents’ death? -Tax efficiency: if you are lucky enough to have a decent estate of significant value, efficient planning can ensure it is passed to your loved ones in the most efficient tax terms. -Executor: who will you choose to be responsible for ensuring the provisions set out in the will are complied with? For more information, check out the Law Society of Irelands website, where they can help you find a Solicitor who can help: https://www.lawsociety.ie/public/Legal-guides/Wills–Probate/making-a-will. 4) Check what benefits your current life assurance and health insurance plans have for children and any benefits your job may provide. It is worth looking at the rider benefits of any of these plans you are paying into and what extras they provide for children that may be of use in the future. For instance, anyone with a life assurance plan with Aviva can automatically avail of Aviva Care for themselves and their family. These include; -Free Digital GP -Best Doctors Second Medical Opinion -Family Care Mental Health Support https://www.aviva.ie/protection/aviva-care Once again, speak to your Financial Planner about insurances you are paying or will need to pay, and if there are extra benefits you would find useful. Once this is all done, it is boxed off, and you can enjoy the mayhem and madness that being a parent brings! Colin Whelan Senior Financial Planner Irish Pensions & Finance *https://www.zurich.ie/savings-and-investments/education-costs/college/ **https://www.irishlife.ie/blog/everything-you-need-to-know-about-wills/
