Whether it’s for you or your parents, social care is a sensitive subject that can lead to many sleepless nights. Everyone wants to know they’ll be supported in later life, but many are unaware of how much this may come to cost them. This leaves Brits confused over how to best prepare for their future.
Health and social care often get mixed up; whilst health care is funded through taxes but free at the point of use, Brits are expected to pay for social care after being means tested.
It can be difficult to identify the difference between the two, which can have a crucial impact on family finances. Generally, health care covers the treatment and controlling of an illness, disease or injury, whilst social care can include getting someone out of bed, helping them get to work, or supporting them at mealtimes.
Means testing social care
After assessing what support is needed, the local authority will work out how much to charge the person needing care – whether it’s day care, home care, or moving into a care home.
The means test values the total income from pensions, benefits or earnings, as well as savings, investments, property and business assets. How much income and capital a person who needs care has, determines how much they will need to pay.
Whilst some people pay nothing or have their care costs subsidised, others are required to pay for everything if they move into a care home and have over a certain amount in savings.
Property is included as ‘capital’ in the means test unless a partner or dependent relative lives there, or the person receives respite care for under 12 weeks. Deferred payment agreements are available to those whose money is tied up in property. The local authority will delay care cost payments until a property is sold later down the line.
Five tips
Strip away the politics and social care is an emotive issue for those that need care and for their families. Whether it’s a helping hand getting to work, rehab after an accident, or residential care, everyone needs the reassurance that they’ll get the support they need if the time ever comes.
In such difficult times, money is the last thing you want to think about. The following five tips won’t solve absolutely everything, but they might help make the prospect of affording any care less daunting later in life, so that you can focus on the things that matter.
Make your money work harder
Inflation can eat into the value of money sat in cash savings accounts, so you might want to think about protecting your money and growing it for the future, by investing it.
Start early
Whether you’re only able to earmark a small part of your monthly income each month, or dedicate your annual bonus, the earlier you start the better.
Not only will your money have a longer time invested, but you can also benefit from compounding – where your returns earn their own returns. This is arguably one of the most powerful forces when investing.
Know your investor profile
Knowing your investor profile is one of the first steps towards achieving your future goals – this means understanding what you’re investing for and when you’ll need your money.
You might be investing for a future that’s 50 years away, or a little sooner for your parents. Your time frame dictates how much risk you can take on when investing. Investing in the right way for you means you can sit back and think about the things that are important, instead of worrying about the performance of your investments.
Diversify
Putting all your money into only one investment is never a good idea – no matter how confident you feel you know how things will play out.
By spreading your money across investments and asset classes, you can manage the risk in your portfolio and aim to offset any losses with gains made elsewhere.
Live in the present
Managing your portfolio takes time and the necessary expertise – things most investors do not have. That’s why low-cost, hassle-free investing solutions are so important – especially when priorities start competing.
