Financial Planning for the growing family

3 December 2016
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Category Family
3 December 2016, Comments 0

There are many challenges that parents will face as their family grows. As the children get older their demands only increase. The demands come from all aspects of life be it the amount of quality time they want you to spend with them reading or watching a movie, or even the amount of schoolwork that you need to help them with. The time spent might even be ferrying them around their various activities while you are an unpaid taxi driver. With all of this happening at the same time it is very easy to forget the financial planning aspects of the growing family but do not leave it too late as it is always better to address this as early as you can.

Family problems

To plan adequately for the growing family requires you to identify what the needs are. There are questions that you as a parent need to answer for yourselves. This could be around the lifestyles that you wish to lead for you and your family. The big items that you need to consider are around housing, school fees, extra-curricular activities etc.

Housing

Start with the biggest item here, housing. Does your current house have enough space for the growing family. The amount of space you need for a toddler is definitely not going to be sufficient for a teenager and if you have more than one child then do you plan to add to the family headcount? All of this will have an impact on your decision making and need to be planned for. So let us imagine you need to move to a bigger house sometime in the future. Do you know when this will be? If you are planning this then it will help to know an approximate timeline so that you can ensure that there are sufficient funds for the upgrade. When you sell a property you will incur costs. If you have an existing mortgage then this will be paid off with the proceeds which hopefully is enough to be a deposit into the new house. If you intend to upgrade and have a bigger nicer house in a more upmarket location then expect that you will need to come up with an additional sum of money to add to the proceeds from the sale.

Another huge consideration is the timing of the sale of your existing house and the purchase of the new one. It doesn’t need a genius to know that at any point in time you will need a place to live. So is it possible to time this transaction perfectly so that you complete the sale of your house and the purchase of the new one on the day that you move? Sometimes it is possible but this is very stressful and leaves no margin for error. If at any point in time one leg of the transaction fails then you will either end up with two properties or none at all. Both of these are situations that you cannot afford to happen

If you can sell the existing house before you purchase the new one, you will have the funds in place to complete the purchase of the new place, but you need to find a place to live.

If you are able to buy the new house before selling the old one then you will not have released the funds from the sale of your existing house and therefore will need some form of bridging finance to tie you over the period when you actually own two properties. This may be costly to arrange and carries the risk that you have two properties for a longer period than you can hold out for. Whatever the scenario, you need to make sure your family cash flow can cope with this outcome

Even if you have managed to sell your house and buy another one, there are many other related expenses that need to be budgeted for. These would be the various legal fees, and the taxes associated with the sale and purchase.  This is called stamp duty. Moving costs need to be factored in and don’t forget to budget for the renovation of the new place.

If you are moving into a brand new place then you may not need to do too much work. Can expect that the new kitchen and bathroom is well equipped and you don’t need to buy appliances. But if it isn’t then there could be new cooker, hob, freezer, fridge, carpets and furniture to buy

Even if you have furniture to move from the old place to the new, if you are buying a bigger home then there will almost certainly be a need to buy more furniture. You may not want to keep the same décor and therefore have to spend money to make the new home look beautiful.

Education

There are some countries where education is free but in many, you will expect to make some payment. If the public education is cheap or free, the standard may not be what you want for your children and you are considering a private education. Private schools do not come cheap and therefore is considered as a major expense that needs to be budgeted for. The amount really depends on the type of school and even the country that you want your child to be educated in. For instance a boarding school in the United Kingdom will cost many thousands of pounds for one year. Your child will be in that school for at least 2 years if it’s A Level or more if from the age of 12

After school there is also University to consider. While these days the value of having a university degree can be questionable, there is no doubt that the cost of getting that degree is considerable.

Summary

The big ticket items in life are very costly. It is important to really think about the plans and decide how you will meet your investment and savings targets so that you can pay for these things. Please consult your own professional financial advisor who will be able to help you plan.

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