Balancing work and family commitments can be very challenging for dads. We face increasing demands on our time as we elect to take a more hands-on approach in the upbringing of our children, while still striving hard to build careers or businesses.
Paying attention to family budgeting and formulating a long term financial plan are often put on the back-burner. Studies here and overseas show that approximately 70% of families don't have a long term financial plan. Dads need to be actively involved in family financial planning decisions; we need to make it a top priority.
Here are 5 fundamentals a family financial plan shouldn’t be without:
1. Will - young fathers often don’t feel they need to put in place a Will as they are young and healthy. Drafting a Will and preparing for the inevitable however shouldn’t be ignored. If you die without a Will, you are intestate. This means the State Government determines, according to a predetermined formula, who receives your assets and who is appointed as your children’s guardian. Sitting down with a solicitor is recommended as Wills need to conform to strict legal requirements; ambiguity can result in cost and delay.
2. Power of Attorney - this allows a third party to act on your behalf in the event you’re unable to take care of your financial matters due to absence or illness and continues to operate in the event of mental incapacity. This needs to be drawn up by a solicitor.
3. Personal insurance cover (such as income protection, life insurance, total and permanent disablement insurance, trauma cover and private health insurance) - protecting your family, income and debt is important as there are others now relying on you for financial security. How would you pay your mortgage if serious injury or illness prevented you from earning an income? Personal insurance in your 20s or 30s is relatively inexpensive. Some personal insurance can be structured through super to ease the burden on cash flow.
4. Emergency fund - to avoid financial set backs, try to automatically transfer 10% of your total monthly income to an account for emergencies. Lump sums such as the Baby Bonus and tax return refunds can be deposited into the account to push the balance along. Make accessing these funds difficult and invest in only secure investments, such as cash or term deposits.
5. Children’s education fund - there are numerous tax-effective products, such as some imputation bonds, which both grandparents and parents can contribute to, and are designed to facilitate accumulation of “tax paid” lump sums. They are “set-and-forget” whilst in their accumulation phase, and after 10 years there are no personal taxation or capital gains tax (CGT) implications, nor any tax reporting obligations.
I wish all fathers a wonderful father’s day.
James is the father of an energetic two year old, with number two on the way! When not at work, you'll find James spending time with his family or running along the coast between Coogee and Bondi.
James Randle | Financial Adviser Phone: 02 8456 5333 Mobile: 0414 669 835 Email:
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Website: www.randleadvisory.com.au
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