The family factor

Professional success often coincides with growing family responsibilities: for your spouse, children and even parents. We can divide the financial consequences of these responsibilities into protection and legacy.

What would happen if you were hit by a bus? What would happen if you and your spouse were hit by the same bus? What would happen if an accident or illness meant that you could no longer work? A financial plan without protection is built on sand, but it’s amazing how many people have only the most rudimentary level of protection in place, often just that provided by their employer. Some don’t even have a will.

Although protection is a relatively dull area of financial planning it’s vitally important. I find that clients are frequently astonished when they find out the extent to which their families are exposed to potential misfortune. And sorting it out, getting a plan in place to prepare for the worst, can bring great peace of mind.

Clients get more excited about legacy, but it’s often not well thought through. I’ve seen the full spectrum of approaches from parents providing for their children to the maximum extent possible, which we might call an indulgent philosophy, all the way through to those who treat their children as though the money didn’t exist at all and try to artificially create an environment of scarcity — what we might call a parsimonious philosophy.

These are deeply personal matters that go to the heart of what you think it means to be a parent. I find myself oscillating between a desire to do all I can to protect my children financially from all the world’s uncertainty and a desire to avoid spoiling them, to give them agency and to equip them to deal with the world. And it’s an area where there can often be conflict between the two parents in a couple.

I recall one case where someone I was working with was ready to retire but his wife wouldn’t let him because they had yet to acquire a mortgage-free property for each of their children. It emerged, rather late in the day, that they had quite different views about what providing for their children should mean in practise.

“A legacy on death could be well into your children’s retirement. Does that make sense or is the money more useful when they are younger?”

It’s so important for couples to decide proactively how they will provide for their children, what their philosophy of provision is going to be. An active decision about how much to give your children is freeing. It gives you comfort that you are acting in line with your values. And at the same time avoids you getting trapped in a never-ending sense of needing to do more, which can prevent you making the most of your own life.

Another factor that is changing the way people think about provision for children is increasing life expectancy. A legacy on death could be well into your children’s retirement. Does that make sense or is the money more useful when they are younger? We need to think through how much, when and for what? And the practicalities of how: junior ISAs, junior SIPPs, children’s bonds and so on.

Maybe most important is the money legacy you bequeath to your children through your example and what you teach them about money. As we’ve seen these beliefs are instilled at an early age. Helping your kids develop a constructive and mature relationship with money can be as valuable as any financial legacy.

Have a look at the next factor — investment.

A view from the other side

Advice from my daughter Anna on money and children.

Questions to start

Is my family adequately protected in all cases if the worst happens?

What is my philosophy of provision for my children and is my partner of like mind?

How much will I give, when and for what, and how will I plan for this?

Start a conversation

If you like what you see, do get in touch to ask a question, share some thoughts or fix a time to chat. I’ll do what I can to help.