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Five financial planning tips for mothers

Date: 24 March 2022

Starting a family can drastically change a mother’s life, priorities and finances. Having a detailed financial plan in place can go a long way towards helping someone cope with such big changes and will alleviate some pressure during what is often a strange and stressful time.

The increase in flexible working post-pandemic may support greater sharing of childcare responsibilities, but at present mothers still shoulder a lot of the load. Due to this, some mothers can suffer ‘a motherhood penalty’ which sees them earn less and in turn save less than their male counterparts.

Emma Prince, financial adviser at Quilter, shares her top five tips to help you avoid some of the most common financial pitfalls to ensure you make the most out of your finances:

1. Don’t lose out on child benefit or tax-free childcare

“If either your or your partner’s income is over £50,000, you may have lost some or all of your child benefit. However, by keeping your taxable income below that threshold you could regain some of your allowance – for example, by making personal contributions into your pension.

“Additionally, by taking advantage of the tax-free childcare scheme, you could benefit from up to £500 every 3 months (up to £2,000 a year) for each of your children to help with childcare costs if you are eligible. For every £8 you pay your childcare provider, the government will pay £2 towards these costs.”

To see if you are eligible, please visit the government’s ‘Tax-Free Childcare’ webpage.

2. Not claiming child benefit can impact your pension provision

“Even though retirement might be the last thing on your mind when you’re looking after a new baby, what you do now could have a big impact on your future finances.

“If you don’t claim child benefit you could be missing out on National Insurance (NI) credits which could then mean that you won’t qualify for your full state pension. Even if you don’t meet the criteria, may still wish to consider completing the claim form to retain NI credits when caring full time for a child. Each year’s credit is worth £250 a year at state pension age.

“Having a career break could also affect your private pension, so it is important to start saving as early as possible and try to continue to contribute to a pension even if you don’t have a regular income.”

For more information on child benefit and the state pension, visit MoneyHelper.

3. Make a plan to pass on your wealth

“With more and more families considered complex these days, it can become harder to make sure that your wealth is passed on in exactly the way you want.

“For example, if a mother with young children had a significant inheritance that she wanted to use for their education but then died or got divorced, that money may not end up being used in the way she wished.

“A financial adviser can talk you through the different options available, such as whether putting the money in a trust could be the best way of fulfilling the dreams you have for your children’s future.”

4. Do not forget to protect the primary carer

“A lot of people get protection products such as critical illness cover, life assurance or income protection from their employer as a workplace benefit. But, for mothers taking a career break this can mean that they are left unprotected leaving their family exposed.

“It’s worth remembering that childcare can be enormously expensive and if the primary earner needs to flex their hours to allow them to also become the primary carer, be that because the mother has fallen ill or worse died, then this can have a huge impact on a family’s finances.

“Having financial protection in place for a single mum is even more important as the family will be totally reliant on her income.”

5. Save for your child’s future

“Creating a savings plan is a great way to ensure that your child has a leg up in life as and when they fly the nest.

“Starting right after they are born and putting as much as you can afford regularly away can end up meaning that you can build up a sizable pot of money to give them when the time is right.

“There are several different options for doing this and one of the most popular is a Junior ISA where your child will be able to access the money saved in the account when they turn 18.”

Before opening an ISA for your child, read our article on ‘opening a JISA’.

As a mother, it’s only natural to want the best for your children and prepare for a secure future.

Financial advice can provide support in all aspects of your finances but can be particularly useful when considering products and solutions to ensure you make the best possible choices for your personal circumstances.