How much are you worth?
Here’s the question of the week: how much are you worth?
This has nothing to do with how much you have in the bank, or the value of your estate.
Legal and General have been crunching numbers again, and have come up with some stuff that will be music to the ears of any parent. They’ve actually worked out how much you are worth!
While it’s hard to reduce a parent to a mere price tag, L&G have been writing their ‘Value of a Parent’ reports for 30 years now, so they know what they’re about. They’re speaking of the value of a parent within the household, in terms of the labour they put in.
If you’re an Northern Ireland mum, you should be paid £39,197 for all that cooking, cleaning, and parenting – and if you’re an Northern Ireland dad, you’re clearly relatively useless by comparison, and get just £21,680.
The serious side of it is that it shows how much labour and input would be lost if, heaven forbid, something were to happen to you or your spouse. Not that your family would suddenly hire a housekeeper to replace you, but it’s a guide nonetheless.
Life insurance and critical illness insurance (CI) are the two ways to cover the financial loss, if this were to happen.
CI can also cover your child’s life or cost of caring for them in a long-term illness, and some policies include this for free. It’s a lot more common than you may think: child illness is among the top five reasons for critical illness claims, and for the insurer AIG is actually second from the top.
Now we’ve looked at the value of a parent – let’s look at the other side of the report: the cost of a child. Hold on tight. This is going to shock you.
Legal and General tell us that, from their research, parents reckon it costs around £123,000 to raise a child to age 18.
Those parents are sorely deluded – the real cost is £184,000. That’s £61,000 more!
Looking at it on a weekly basis, the cost of a child is £197, including £27.15 spent on pocket money, treats and entertainment. At the same time, we spend just £4.82 on insurance, to protect them financially in the future.
And remember: these calculations are for just one child. Go forth and multiply these figures, if you have more than one!
Incidentally, the cost of raising them to 18 is not the end of it, says L&G: most do not become financially independent until they are 22, when many ‘children’ get their first job.
But to help them land that elusive first position, let’s not forget the increasing cost of getting them an education. Now here’s the important question: what would be their chances of studying, if something were to happen to you?
Let’s look at how you can insure your child’s education against the loss of your income through serious illness or death.
There are a range of policies that relate to this, but one I’m thinking of, just as a random example, will pay their third-level fees, up to the current maximum of £9,000, and that cover will rise if tuition fees go up in the future.
It can also give your child a good leg-up when they leave school. They would get £3,000 a year for the three years after they turn 18, even if they don’t go into third-level education.
The policy can include £840 per term – not per year, per term – to cover school costs such as uniforms, books, and school trips.
There’s also a special provision for school absence. It’s a one-off payment of £1,000 when a child is hospitalised for more than 10 days, or is at home but has to miss more than 20 consecutive days.
But my personal favourite is what’s called a ‘Star Award’, a module in the policy which pays £1,000 if your child achieves excellence in any school activity.
So remember the value of your labour, and the virtual cost to your family of losing it. And when you think of your children’s education, remember the wonderful option of ‘family protection’ insurances, to ensure that losing you would not mean the end of their dreams of college.
But above all, dads and mums - keep pushing that hoover!
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd”