Protecting Your Children

Lee Smythe asks what happens to our children in the event of our death.

Most people want a better life for their children. But perhaps not so clear are the financial implications for children should they find themselves without parents. It is important to have an up-to-date will, especially if you have young children, as this is your opportunity to dictate who should look after them in the event of your death. Otherwise the state decides.

If something happened to you, where would the money come from to raise your children? If the main wage earner dies their income would need to be replaced. But what if the main carer dies and the wage earner has to continue working? And what if both parents die – would the children’s guardians be able to afford the additional cost?

Research shows that most people are woefully underinsured, owing to reluctance to address mortality or to misconception about cost. For a healthy non-smoking 35-year-old man, £250,000 of life cover for 25 years costs as little as £17.50 per month – family security for less than the cost of a bottle of good wine each week.

That covers in the event of death. But much more likely is that you’ll suffer and survive a “critical illness”, such as heart attack or cancer, before you are 60. This can have a worse financial impact on your family, as you may be unable to work but still have bills to pay, possibly more. For the same man, the monthly cost is around £86, which is roughly equivalent to Child Benefit for one child.

If you already have cover it’d be worth reviewing its adequacy, tax efficiency and cost. If you haven’t yet planned for these events do so now – peace of mind may cost less than you think.

Lee Smythe is Managing Director of financial planners Smythe & Walter smytheandwalter.co.uk