x Abu Dhabi, UAEWednesday 26 July 2017

A financial life plan for the little ones is not to be ignored

Superwomen: Your money can do a lot to protect your family, so make time to make it work for you.

The girls were making breakfast. Abby was recovering from her car crash but still couldn't walk far, so they'd decided to bring Friday brunch to her bedside.

Sasha baked fresh banana muffins and Kat was making egg white omelettes. Lucy had brought lots of magazines from work to keep Abby entertained for the week ahead.

"So what has everyone been doing this week?" Abby asked. The girls were eager to fill her in. Lucy had just come from an exciting trip to Paris to shoot a new commercial, while Kat had been running around town, hosting anti-ageing workshops for women.

"And you," Abby asked a suspiciously quiet Sasha. "Mmm, a bit boring really," said Sasha, feeling a little "mumsy" and uninteresting in comparison. "I've been researching baby Oscar's life plan."

Make protection a priority

The girls stared at her. Oscar wasn't even a year old. "I think we would all agree that we want to protect our children against what life may throw at them," Sasha continued, "so we've opened an investment account for Oscar."

Abby was impressed. As baby Oscar's godmother, as well as a financial whizz, she was proud of Sasha for thinking ahead. "I've recommended a life plan for a few of my clients with children, but rarely do parents go for it. They don't see it as a necessity," Abby said.

"Well, to be honest, I'm not enjoying the big pay packets any more, not like you girls," said Sasha. "But Frank and I had often talked about getting Oscar a fully-funded life plan. After the events of these past few weeks, we decided to make it a priority."

Top tip

Frank and Sasha decided to buy Oscar a maximum cover of US$150,000 with a level of critical illness to the value of $100,000 (66 per cent).

He is currently a year old and they want to have the policy paid up and ready for him when he leaves university at 22.

This will cost them $400 per month, indexed at 10 per cent a year, and Frank and Sasha will have the comfort in knowing that it will be there for the whole of Oscar's life.

Baby budget

Lucy was curious. "Sasha, what's it like being on a baby budget?"

Lucy had been making a serious effort to rein in her lavish lifestyle but was finding it hard work. She was interested to know how much Sasha could survive on.

"Well, I have a monthly budget of Dh10,000… " Sasha started.

"What," blurted out Lucy. "How do you survive on that?"

"And," Sasha continued, "that's to buy the groceries for the house, my car loan, fuel, hair, clothes, other accessories and running the family," she said.

Once upon a time, Sasha lived off six times that amount. Of course, then she'd paid all her own bills, while these days, Frank's salary funded the rent, electricity, telephone and their savings and insurances. But Sasha made her own contribution, making sure all their paperwork was up to date and setting the ball rolling when it came to financial goals.

This crazy city

It is important to identify your own roles in the family and the expenses. Just because you're not the main breadwinner doesn't mean you can't get involved. Be part of the team.

Lucy was more than impressed with Sasha's budgeting skills. Casting an admiring glance up and down her friend, she congratulated her for looking so good on so little. As they tucked into Kat's delicious egg-white omelette, all four felt happy.

In this crazy city, sometimes life and love isn't found spending a fortune on looking fabulous at an expensive brunch, but rather in the company of good friends at a bedside breakfast, eating home-made food and discussing little Oscar's life plan.

The two main reasons people save and invest is to provide for when they stop working and to protect their family. Your money can do a lot for your children, so make time to make it work for you. See it as a gift rather than a life assurance policy. It's the chance for you to gift this to your child when you feel the time is right. At 18, he or she can convert it into a full adult plan, leave it alone or cash it in.

 

Janelle Malone is a writer, blogger and commentator on personal finance. You can contact her at www.womenmoneyandstyle.com for any further financial questions you may have.