Business

You never know what’s coming - so think ahead

You can't always depend on the Bank of Mum and Dad to keep you secure in the future
You can't always depend on the Bank of Mum and Dad to keep you secure in the future You can't always depend on the Bank of Mum and Dad to keep you secure in the future

A SCHOOLTEACHER once received a ‘Thank You’ card through the post from an anonymous parent who was grateful for what the teacher had done for her child.

The card contained a gift: two tickets for a theatre show by the famous entertainer Danny La Rue. When the teacher and her husband returned home from the concert, they found their house had been cleaned out. Burgled.

I read about that some time ago, but the lesson still holds true: in this day and age, you never know what’s coming. That’s why it pays to think ahead. We have all these ambitions for our children, but without proper planning, they could be ambitions that never come to be.

So why not protect your ability to help your child?

Parents need to consider that some unexpected event – like that burglary – can intervene to reduce their plans to ruins.

This is where family protection insurance comes in. It’s well-named: it protects your family, if the worst were to happen to you.

The most common type, of course, is life insurance. No, you are not planning to pop your clogs any time soon. But if you did, your children would have to live without your income.

Tragically, we all know of people who were stolen away before their time.

Then there is critical illness insurance, if you have to give up work due to an unexpected and serious health setback. It can be enough to pay off your mortgage, or see your child through university, or help your child with a deposit on a house.

The odds are greater than you think: one in four men, and one in five women will suffer a critical illness during their working life. Heart attack, cancer, stroke, MS, and major surgery are all events that can bring our earning years to an abrupt end. And it’s not just for the elderly: Legal & General will tell you that the average age for critical illness claims is just 47.

Isn’t that the age you would be, when your child is hoping to go to college?

The state doesn’t help as much as it used to. Students in Northern Ireland from lower-income households might receive a ‘maintenance grant’ up to £3,475, but considering that tuition fees alone are up to £4,030, it’s pretty clear that parents are going to have to stump up, or a student loan will be needed.

TV money man Martin Lewis reckons that a student needs around £8,430 per year, including tuition fees, to have a decent lifestyle at university.

Martin pointed out that when it’s all over, a student loan can take up to 30 years of your child’s working life to pay off. And here’s the fun part: interest is generally charged at the rate of inflation, so our students can’t predict at the outset how much they are eventually going to have to repay.

But university is not the only financial challenge our children face. Even for those who don’t want to go on to study, there’s the increasingly enormous challenge of getting their foot on the property ladder.

Again, they will call on the most popular bank in the nation: Bomad. Never heard of Bomad?

It’s the only bank in the world that doesn’t have a shop-front. It doesn’t advertise on the high street, it doesn’t assault you with advertisements on the internet, and it doesn’t charge interest , or expect its loans to be paid back. Bomad is the 'Bank of Mum and Dad'.

Bank of Ireland tell me this week that for them, in order to buy a modest house at £100,000, your child would need a minimum deposit of around £14,000 to get a mortgage.

You two are Bomad. The Bank of Mum and Dad. It’s a long way off, but just in case anything happens in the meantime, family protection insurance can make things more secure.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005. Further information go to “Kennedy Independent Financial Advice Ltd” on Facebook