Ensure 'milestone moments' don't become millstones around your neck
Have you heard of ‘milestone moments'? These are the turning points in your financial life, when brand new financial needs kick in, and you most need advice to replan your future. Milestones are not hard to spot - getting married, starting a family, organising a pension, covering yourself against loss of income, making your first will. Getting yourself financially sorted.
Why should you do this with financial advice, rather than going it alone? Well, I could go on until I was blue in the face, but today I'll let the numbers do the talking: the pensions company Royal London tell us that people who take financial advice can be up to £40,000 better off at retirement.
First milestone moment: getting married. For many of us, this is when we take on most of the debt we will ever have in our life. I have one word for you here: mortgage.
However, you might not be able to take a mortgage right away, you might want help with saving for a house deposit. At this point, perhaps you would like to talk about a lifetime Isa, which can be used in two ways: either for a first property purchase, or held over and drawn tax-free when you turn 60.
A lifetime Isa offers a 25 per cent government bonus, so that for every £80 you put in, you get another £20 from the Exchequer. It's not a simple product, however, as the former pensions minister Ros Altmann has pointed out. Her advice is: get yourself some advice.
Second milestone moment: having your first child. Don't be fooled by their cuteness - he or she is a little money-gobbling machine, and they'll fleece you, over the years. That's why you may want to consider ‘family protection insurances', the products that safeguard your family against any possible tragedy that may befall you.
Aviva tell us that one child in 29 loses a parent before they grow up. Sombre news, and a great personal loss, of course. But it is also the loss of an income, which could impact your child's prospects of having a full early education (those school trips can cost a fortune!) or getting to college or university. The answer, of course, is to take out life insurance, in fact starting a family is often the trigger that spurs people to do that. In a tragic situation, your family have enough to deal with, but an insurance payout can at least take the financial pressure off, and could even secure their future.
What happens if you have to give up work due to serious illness? One in four dads and one in five mums find themselves doing just that, in fact a critical illness is much more likely than death, during your working years. The average age for being hit by a critical illness is 47, according to Legal & General.
If you'd had your first child at 30, that would deprive your child of your income just as they come 17, perhaps with great plans to go to college.
That's why starting a family is, for many wise people, also the time to take out critical illness insurance (CI), which gives you a once-off, tax-free lump sum if you suffer a major health setback such as cancer, heart attack, or stroke. That payout could, for instance, pay off your mortgage, again removing a major worry at a difficult time.
I remember the first time I visited Belvoir Park, Belfast's former cancer hospital, which closed in 2006. I was stunned to see that a good third of the patients were children. I had thought of cancer as an older person's disease, but my view changed that day, so it's good to know that your CI policy can cover not just you, but also your child, for the cost of caring for them in a long-term illness - and some policies include this for free.
As you see, getting the right insurance policy is not so simple, it's important to tailor your insurances to your own particular needs. The Association of British Insurers has in the past warned against buying insurance via price comparison websites, where you have little scope to explain your personal circumstances and needs. When you're looking for insurance, you just can't beat getting belly to belly and face to face with one of us fine fellows: your friendly neighbourhood financial advisers.
Which brings us to your final milestone moment: making your first will. Again, often comes when you start a family. Making your intentions clear in a will can fast-track the transfer of your assets and insurance payouts to your family, by making it crystal clear who should benefit from your wealth, when you die.
With good advice, we can ensure that your ‘milestones' doesn't become ‘millstones' – around your neck!
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or at www.mkennedyfinancial.com