subject: Preparing for a family with a savings account [print this page] Preparing for a family with a savings account
Should you be planning to start a family over the next few years, one hugely important consideration you will have to make is how you will make sure you are financially stable when your child is born. When it comes to coping with some of the extra expenses involved with parenthood, saving sooner rather than later can usually be a smart move.
Once you've made the decision to start being more sensible with your money, you might feel the task seems a little daunting. A concern might be how much of an impact saving will have on your current lifestyle, but taking a realistic approach to it could prove this does not have to be the case. In fact, while there's still one less mouth to feed, you really should be making the most of it by keeping some cash safe for clothing, toys, medical bills and all kinds of other extras later on.
It is of course, inevitable that having a baby is going to change your financial situation, especially if you find that your earning power has been compromised because of either paternity or maternity leave - or in some cases both. But one way to combat this is to make sure that you are able to secure the best savings rates possible when setting up an account. If you feel like you want a more tax-efficient way of getting your money to work harder you might want to think about an ISA. A fixed rate ISA, for example, could be an option for young couples in the early stages of planning a life together as it provides a stable return. However, variable rate products are also available if you feel a longer-term family planning facility is what you need.
If you do decide either of these products are what you're looking for, you'll want to properly understand more about ISA allowances. These detail how much can be paid into the facility over the course of the tax year, which changed in April 2010. From this date, ISAs became an even more attractive option to all potential savers when this limit was raised to 5,100. This means you can put anything up to this amount into a cash ISA, while still having the option to invest further in a stocks and shares-based one. The total amount you can invest is 10,200, which can be split any way you see fit, but the cash ISA limit cannot be exceeded.
If, however, the pitter-patter of tiny feet becomes a reality much sooner than you expected, you might want to think about your child trust fund options. Basically, the government will make a payment into this when the child is born and once again when your son or daughter reaches seven. In the meantime, you, your friends or family members can add to this over the years and when it matures at 18 years old, you could find your child is better equipped for the future.
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