1st June is the United Nations Global Day of Parents, highlighting the critical role parents play in raising children. The day is dedicated to appreciating parents everywhere for their ‘selfless commitment to children and their lifelong sacrifice towards nurturing this relationship.’. We look at what that commitment looks like in financial terms.
Life transitions always require a financial planning reset but parenthood is perhaps the most transformative of them all. With the birth of a child, you become entirely responsible for another human being who is dependent on you for all their needs. This is a major trigger to get family finances into shape for many people.
These are the six important questions to ask to determine whether your children are sufficiently protected against the nasty surprises that life can throw your way.
1. Can I access the best healthcare for my child if they are ill or injured?
A child being seriously ill or injured is every parent’s worst nightmare and this is compounded if you are concerned about whether you can afford any treatment required. Eliminate this worry by taking out comprehensive health insurance. Nothing beats the peace of mind of knowing that if your child needs expensive treatment, an insurance company will cover the medical bills.
2. Will I be able to afford the education my child deserves?
Education costs are eye-watering and rising, but a university education is still highly desirable. The advantages are numerous and well documented: graduates benefit from higher earning potential, greater financial stability, and even better health. No parents want their child to graduate with crippling debt and the best way to avoid that scenario is by forward planning. Setting up a savings plan for your child’s education is the sensible way to spread the cost over many years and harness the power of compounding. Consider a regular savings plan to ease the financial burden when the time comes for your child to attend university.
3. Have I nominated guardians for my child?
If you haven’t already named a legal guardian for your child, this is something you need to rectify. No-one likes to stare their own mortality in the face but clearly stating your nominated guardian officially in writing can mean the difference between stability and chaos for your child in the awful event that they are orphaned. Make sure that your named guardians are willing and able to take on this enormous responsibility. This is an important step to ensure the future wellbeing of your child in the event of your untimely death and needs to be reviewed from time to time, particularly after an important life event such as a divorce.
4. Have I made a will?
Don’t make the assumption that your child will inherit your estate if you die. They may well do but leave no room for doubt by outlining your wishes clearly in a correctly drafted and witnessed will. You will need to nominate an executor of your will so, again, make sure they are happy to carry out the role and ensure they know how to access your will. Estate planning is best approached with the help of a professional and if you’re an expat, you should seek the advice of an expert who is well versed in cross-border issues.
5. Do I have sufficient life insurance?
Losing a family breadwinner can easily trigger a downward spiral into financial precarity. If bills can’t be met, major lifestyle changes such as moving house or changing school may be required, all at a time when children are coming to terms with a major loss. You can’t protect 100% against the loss happening but you can minimise the impact by taking out sufficient life insurance to ensure that your family won’t have any financial concerns in the aftermath of your death.
6. Am I instilling good financial habits in my child?
So many people adopt poor financial habits from the start of their adult life because they have never been taught the skills required to manage money. You should start educating your child with the basics very early so that by the time they gain independence they are financially savvy and understand the dangers of debt and the importance of saving. You’ll find more ideas here.
If you answered no to any of these questions, you have some financial planning gaps that need plugging to ensure that your child is adequately protected.
We have helped hundreds of expat parents ensure that their children enjoy rock-solid financial protection. If you’d like help securing the financial future of your loved ones, whatever life has in store for your family, contact us for a consultation.
A leading provider of expat financial services and wealth management services across Asia.