For Karen and Greg, it’s their children. Planning your children’s future is important – and whether that’s saving for their education or a deposit for their first home, you want to give them the best chance at success. And so, the couple decided to set aside a minimum amount for their children’s future that was previously being absorbed into the family’s day-to-day expenditure.  

Questions to ask

Before we delve into a savings plan, we encourage you to consider the following:  

– How do you want to use your wealth? By that, we mean how much do you want to spend, save, grow or give?  

– What is your intent for your wealth for your children? For example, education or a deposit for a house.  

– How can you protect your family and safeguard your children’s future? What if something happens to you?  

– What’s the minimum that you need to set aside for your children? And when should it be passed on to them?  

– How can you pass on your values relating to wealth to your children?  

Investing in your family’s future 

There are plenty of suitable investment products for people in Karen and Greg’s situation. After completing a financial review, we agreed that they would like to save €400 every month – a portion of their income along with the monthly children’s allowance – into a diversified savings product.

Most people don’t save the children’s allowance from day one – but practically speaking, if you save it for ten years at an average of 5 per cent returns, it will generate a pot for your intended goal of over €60,000 – that’s not insignificant when you consider funding the average Irish undergraduate degree costs €40,000. By establishing a savings plan, this family now has the comfort in knowing that there are structures in place.

Of course, when it comes to savings plans, we’re often asked by clients: what is the minimum amount we  should consider for regular savings? We often have clients who set up savings plans for as little as €150 per month. Whatever the amount, savings will grow over time – it’s an easy goal to prioritise.

Another consideration is protecting the family’s financial stability should parents lose their income on a temporary or a permanent basis. We find that most households are not in a position to sustain their current lifestyle with a loss of salary for more than three months – and this held true for Karen and Greg too.

Karen is highly paid, but her remuneration does not include any other additional benefits. So, we advised her to direct some of her salary towards an income protection policy. Karen opted to protect herself to the maximum allowable (less any state benefit) of €100,000 or 75 per cent of her salary – and the cost of doing so was approximately €200 per month (or €2,400 per year). Income protection plans can qualify for income tax relief at an individual’s marginal rate and, therefore, this reduced down her monthly premium on a net basis to €120 per month or €1,440 per year. 

During our review of protection policies, we identified a gap in Karen’s life cover. While they had existing mortgage protection, and Greg had life cover through his employment package, Karen had no additional cover. That meant the family would be left short should anything happen to her. We advised that it would be in the couple’s best interests to put in place life cover for Karen to the sum of €500,000. Should Karen pass away, the policy would pay out a lump sum of €500,000 to the family – and the cost is approximately €70 per month or €840 per year.

In their 30s, Karen and Greg realised that getting organised now would set the tone for the years ahead. By defining their investment goals and putting the right protection plans in place, they’ve taken meaningful steps to ease future pressures and create financial security for their children.

 If you have a particular financial query, contact [email protected] to receive a financial consultation.

*Names have been changed.

SEE MORE: Case Study – How To Implement The 50/30/20 Financial Method