‘We are family, I got all my sisters with me,” sung Sister Sledge back in 1979, veering from the mainstream image that a family should only include a mum, dad and 2.2 children.
Fast-forward to today and this familial hegemony has evolved, with just one in five families fitting the traditional stereotype¹. Whether you are same-sex parents, a single dad, or a married couple with no children, you have financial goals you want to achieve.
The problem is, traditional financial planning strategies aren’t designed to help the modern family achieve these financial goals. In fact, they feel less financially secure than their more traditional friends¹.
Achieve your financial goals
Knowing your investor profile is one of the first steps to understanding how to meet your financial goals. Your attitude to risk, and thus the returns you can expect, depends on your personality, investment goals, and make up of your family.
If you’re a parent, you’re probably stuck in the Parent Paradox; your life’s more complicated and expensive, but you’ve got less time and money to invest confidently. You need your investments to be flexible in case of emergencies and easy to manage because you’re busy.
Although the modern family is concerned by saving for retirement and keeping up mortgage repayments, parents are under increasing pressure to spend more on their children – over a third admit to sacrificing on saving for the future.
Preparing for your future isn’t about giving up on the present; that said, you will need to make sacrifices today to benefit the future you.
Building a strategy that’s right for your family
Celebrating the diversity of British families, we’ve identified three big financial family milestones and explain how you could get one step closer to achieving your goals.
What: Big Holiday
When: Five years
Holidays are crucial; it’s time for you to relax. But it takes careful planning to ensure you don’t break the bank, especially when your children rely on you bank-rolling their so-called ‘independence’.
This isn’t an environment ripe for savers and your money is losing value as inflation outstrips the returns on savings accounts.
That’s why savvy savers have turned to the market in search of inflation-beating returns. Five-years is a medium-term investment, which means you can take on some risk confidently as long as you have a diversified portfolio – any losses should be offset with gains made elsewhere.
It’s important your investments are flexible so you can adjust how much you put in and take out of your investments without being penalised.
When: Ten years
A whopping 87% of parents help fund their kids through university, which means careful planning is needed to ensure you’re not left struggling at the end. With a ten-year plan, you can take on more risk in the hope that your investments will have longer to recover if they do fall in value.
Don’t wait until you have a big lump-sum to invest; by investing smaller amounts more regularly you can smooth out any fluctuations in an asset price, maximising your return.
Make sure you protect the growth and income on your investments within a tax-free ISA wrapper.
What: Deposit for a house
When: 15 years
Owning a home is a financial priority for many, but it can take up to ten years for first-time buyers to save up a deposit. Set to loan out £6.5 billion in 2017, the Bank of Mum and Dad is on course to be the ninth biggest mortgage lender this year.
With a time-frame of 15 years, you can aim high with your expected return. This time frame will encourage you to sit back and ride-out any swings in performance. Short-term trading rarely works, even the most experienced investors get their fingers burnt!
Think about the tax implications of gifting your money to you children. If you die within seven years, your kids could be faced with a hefty inheritance tax bill.
1 Modern Family Choices, Time, 2014