How to financially protect your family

Family is what matters most, which is exactly why it’s very sensible to plan carefully for your loved ones’ financial futures, as well as your own. Not only will this make you and your children more sensible with money, but it will also give you peace of mind about the years to come. Here’s a few steps you can take to financially protect your family.

Take out life insurance

Life insurance is a worthwhile option if you want to ensure that your family can afford overheads such as bills, food and other payments, as well as the mortgage and rent should you pass away. If you have family members who depend on you financially, life insurance is very important. Without life insurance protection and a payout (in the event that you passed away), how would your family afford things when you were gone?

Life insurance is purchased through a life insurance provider. You pay this provider monthly premiums (or annual premiums) to guarantee that the life insurance policy will pay out should you unexpectedly die and leave your dependants without a source of income. The amount of cover you choose to have will determine the amount you pay for your premiums. The higher the amounts of cover you request, and the older you are when you take out the policy, the greater your payments will be. You’ll need to decide the amount of cover you require, depending on the outstanding mortgage you have on your property, any rent or ground rent you need to pay, the number of dependents you have, outstanding debts you have, credit card bills, your current salary and the amounts of income you may receive from other sources (i.e. if your partner or spouse works). You should also consider everyday living expenses such as food, education fees, child maintenance and care, and the cost of your funeral. Generally speaking, you should multiply your annual income by at least five.

Other factors will also affect your life insurance premiums include your age, health, marital status, hobbies you take part in, family medical history, whether you smoke, and whether or not your profession is considered to be of high risk.

If your family ever need to make a claim on your life insurance policy because you have passed away, they will only be successful if you have been transparent with the insurer regarding your medical history and current health. If you didn’t disclose information and withheld details from the insurer, and it affected the circumstances surrounding your death, your policy might not pay out a lump sum.

If you need help taking out a life insurance policy that includes the right amount of cover for you and your family, our experts at Financial Advisor UK can help. All of our professional advisors are FCA-regulated and accredited, and can offer guidance on the right life insurance products for your circumstances. Over time, your life insurance requirements will change. Speaking with a financial advisor can help you ensure that you always have the right cover package for now and into the future.

Set a family budget and save

Budgeting is the best way to ensure that your family always has enough money month-to-month. It sounds simple, but can be harder to achieve than you think. Additional unexpected bills coupled with the ups and downs of general life can throw our household finances off track. The best and easiest way to save is to have an additional savings account so that you can save up a little bit every month. This fund can then be dipped into to cover any unexpected bills that throw you off track on occasion. The easiest way to save regularly is to set up a standing order that deducts money from your account (ideally as soon as you have been paid), and places it into your savings account. That way, you won’t be tempted to skip payments month-to-month. Over time, the money you place into this savings account will start to earn interest and grow. There are plenty of bank accounts out there that offer higher rates of interest to savers, if you are happy to leave the capital in such an account and only access it on rare occasions.

Consider investments

Another option is to place your savings away into an investment vehicle, in the hope of making financial gains. Investing shouldn’t be confused with saving. Investment involves a level of risk, as your investments could go up or down, and there is no guarantee that you will receive all of your money back when you decide to trade-in. Stocks and shares ISAs are available, as well as Unit Trust Investment Funds. You can make small payments into such investment schemes.

It is important to keep in mind that investment products are seen as long-term. You shouldn’t invest money that you may need access to in the short-term future. Long-term however, investments often outperform cash savings in bank accounts, but there is always a level of risk.

To find out which savings and investments plans are right for you, search for the right financial advisor for your needs through Financial Advisor UK. All of our professionals are FCA-regulated and can help you find the right investments to help your money grow.

Save up for your children’s future

Saving up for your children is a great way to set them up for their future lives, whilst teaching them about money. There are several ways you can save for your child’s future to help them financially:

  • Set up a bank account on their behalf (a children’s account). They can start using their account when they are seven, and learn the importance of saving.
  • Set up a Junior Cash or Stocks and Shares ISA. Your child should already have a child trust fund. This fund can be transferred into a Junior Cash ISA. This type of savings plan is a good idea because the interest acquired on the capital in a Cash ISA is tax-free, as is a Stocks and Shares ISA, which is free from Capital Gains and Income tax and also enables you to purchase shares, bonds and other investments on behalf of your child.
  • Establish a child trust fund. This can be transferred to a Junior ISA at a later stage. If the funds are not transferred, a child can access the money when they reach 18.
  • Buy some NS&I premium bonds. These can be purchased with a minimum of £25, and you can win prizes that can be invested back into the bonds, up to a maximum investment amount of £50,000.
  • Start a child pension. You can contribute to this pension until the child reaches 18, upon which they can begin to make their own contributions. They will be able to access this pension when they reach the age of 55.

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