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With more women working and their income being just as important as their partners for stability of the home, they need to consider:
Who would look after the children if they were seriously injured or died?
What would happen if they were suddenly unable to work and bring in that income?
What future plans could not be fulfilled if their income stopped?
If a mother dies whilst her children are still very dependent the emotional affects are bad enough but if that woman works and her income stops then the financial consequences are even greater. It is usual, even today, that a woman is responsible for the majority of the child care, the shopping, cooking, cleaning, washing, nursing, booking of doctor and dentist appointments, taxiing to and from school and clubs, organising holidays, birthday parties and presents – you get the idea. To have to employ someone to provide for each of these services and pay for them at a going rate would be astronomical but many women fail to insure themselves.
What about illness, few employers provide any form of sickness protection meaning that in the event of a long term illness there is only Statutory Sick Pay (SSP) the standard rate currently being £85.85 per week. Short term it may be possible to muddle by but long term something would have to give – a woman is more likely to give up her visits to the hairdresser or craft class than stop her children’s gym or football sessions.
We all have future financial plans – the holiday we want, the car we are going to buy, when we can afford to retire etc and these are based on an assumption that we will continue to work and have money coming in. So if the money stops being received then these future financial plans can no longer be achieved. So insuring your ability to work and earn is vital.
Don’t leave it too late. In December 2012 the European Gender Directive becomes legislation which means that insurance rates for men and women will be equalised. This is likely to mean that female rates will increase to the same level as male. If insurance is secured before this deadline and has a guaranteed premium this legislation will not affect the cost of future premiums, so early action will save money.
Traditionally women have neglected their pension arrangements, relying on their partners to build up sufficient pension rights to provide for their combined old age. With the increase in divorce and women deciding to remain single the need to provide for their own retirement is now essential.
In retirement everyone has their own individual personal allowance so even if a woman retires with a significant other, it makes sense for both to have an income that makes use of the tax free and basic rate tax individual allowances.
A pension is the right thing on so many levels as it is the only savings plan that gives an immediate 20% uplift when invested because the government gives tax relief on top of every individual contribution i.e. contribute £80 and £100 is paid into the pension. There is also the advantage of virtual tax free growth and the ability to draw part of the pension pot take free before an income is taken.
Put Cash to Work
It is important to have sufficient money on deposit to cover day to day needs and a little extra for emergencies – the washing machine always knows to break down just as the overdraft limit is reached. But with interest rates being so low large amounts of money should not be left on deposit because it is not working.
Women tend to be more cautious and can shy away from investments considering them to be complicated and risky. This is not the case, there are interest based investments i.e. low risk, right up to individual stocks and shares in single companies with a wealth of investments in between.
To make money work it needs to have a spread of investment which will include Cash, but long term it will not keep up with inflation so adding other asset sectors, such as Equities, will offer a better opportunity for real growth over the medium to long term.
Make a Will
So many people think that they do not need a Will because they do not have that much to leave, but a Will is about ensuring that an estate goes where it should on death. It also ensures that any estate is dealt with quickly and efficiently. Dying intestate (without a Will) means that a set procedure is followed for the distribution of assets, which does not necessarily match a person’s desired outcome. Also, sorting out a Will is the first step to reducing any inheritance tax liability on the estate.
After hard work and sensible investing most people want to be able to pass on their assets to the next generation. Unfortunately, there is a limit to what can be passed on before beneficiaries have to pay inheritance tax. An individual’s ‘nil rate’ limit is currently £325,000, which sounds like a reasonable amount of money, but when the value of a home is considered, the allowance can easily be used on this one item alone and any value above this amount is taxed at 40%! There are many ways in which the value of an estate can be reduced but this has to be done with the luxury of time so it is never too early to look at such plans.
By looking at financial affairs early it is possible to save inheritance tax and ensure that family reap the benefits from assets that have taken a lifetime of hard work to accumulate – don’t pay more tax than has to be paid to the tax man.
Get a Power of Attorney
A lasting power of attorney (POA) defines who is responsible for an individual should they become mentally or physically incapable of dealing with their own finances or day to day needs. It is a simple way of giving peace of mind. Regardless of age, an accident or illness can happen that means that an individual becomes vulnerable. This is when a power of attorney will step in. If a POA is not in existence then legal representatives have to apply to the Court of Protection who appoint a deputy to manage the individual’s property etc, this takes time and costs more money all at a time when the family do not need any more hassle.
As we are all living longer it means that it is now more likely that either our mind and/or body will give up on us. It is never too early to put a POA in place and if there are elderly relatives then POAs should be discussed with them too.
When shopping online instead of going directly to the shop try a link to a ‘cashback site’. Online retailers pay the cashback sites for referrals and then the cashback sites will pay part of this to the purchaser; receive money back for something you were going to buy anyway. A couple of good ones: topcashback.co.uk and quidco.com, never join a site that asks for a payment upfront.