Money Skills for Kids

We recently decided it was time for our 3 young boys to learn the value of money and the importance of managing it. This was motivated by a need for them to understand how money is earned but also to start giving them small responsibilities in our home and life skills for the future.

We work so hard to ensure our children develop good manners, confidence, empathy along with many other important personal traits. Earning pocket money and taking care of it can teach a child to become independent and to make decisions for themselves.

A few ways to get them started…

1.    An opportunity to earn pocket money

Decide on a list of chores they can complete depending on their age. Pick a day and time to complete the weekly chores but also include some simple daily tasks to be completed e.g. Clearing the table after eating, emptying/filling dishwasher or washing dishes, putting rubbish into the bins. Agree on how much pocket money they can earn and a day that they will receive it each week.

2.  Set a budget... save vs spend

This will help them to understand the rewards of saving and being able to budget perhaps for something they would really like to buy in the future. Decide where they will store their pocket money and set out some goals using two separate pots.

• Spending Pot: Perhaps they would like to spend a fraction of their pocket money each week on something small, so help them to decide on an amount for this pot.

• Savings Pot: They may decide to save for something they would like to buy at some stage in the future or to maybe have spending money for holidays or a day out. If they have a goal amount, see if they can work out how much and how long they may need to save to get to that goal.

3.  Open a savings account

A savings account can be ideal for older children. It can help familiarise them with different financial terms used such as deposits, withdrawals, interest. It also brings a satisfaction if they can see their savings figure increase each week. Another option is to set up a Revolut junior account where you can transfer pocket money to their online account, and they can use a prepaid card. This would be handy now with the preference of contactless payments. They can also use the junior app to view their account balance, while parents have full control of the account.

Family Protection for Cohabiting Couples

When structuring life assurance for cohabiting clients and their family, it is important to remember that cohabitants have no automatic rights to their deceased partner’s assets under the Succession Act.

So, if you are cohabiting and have no Will in place, the proceeds of a life assurance policy could end up in the hands of the deceased’s ‘next of kin’, their parents or even their brothers and sisters, if the arrangement is not structured correctly.

With the possible exception of the family home, the total value of all assets passing between two people who are not married or civil partners, are liable to Inheritance and Gift Tax, regardless of how long the couple are living together. This includes the value of any life assurance benefits.

If the beneficiary did not pay the premiums, or if the beneficiary is not the legal spouse or registered civil partner of the person who paid the premiums, the plan proceeds will be liable to Inheritance Tax.

From a tax perspective ‘partners’ are treated as ‘strangers’ for Inheritance Tax purposes with a threshold of only €16,250 (currently) tax-free. The balance is currently taxed at 33%. Where there are children of the current or a previous relationship there can be confusion over who the proceeds of the life assurance contract will be paid to, as well as how the proceeds will be taxed.

For example, a new client recently asked me to set up a Life Assurance policy for her protection needs. This client is not married to her partner, but they have one child. They had initially received (bad) advice to set up a dual life Term Assurance plan along with their joint life Mortgage Protection plan.

In this instance, I recommended they each set up an individual Life Assurance policy on the other person (i.e. Life of Another) with the premiums being paid from their individual bank accounts. It may be slightly more expensive than a joint/dual policy, but they will potentially avoid a future tax bill of 33% as described above.

In the event of death, who will receive the plan proceeds?

The sum assured will automatically be paid to the policy owner in the event of the death of a partner. If both were to die during the term of the plans, the proceeds will go to the estate. In the case of my client, she will leave the entire estate to their son.

Financial planning is more important than ever….

As a small, self-employed company, these past few months have been a challenge for numerous reasons. But when faced with a challenge, an opportunity can present itself. While I have been unable to meet clients physically, I have been arranging Zoom meeting consultations that are becoming more and more popular and are simple to set up.

The one thing that many people have had for the last 3 months, is time to review their finances and take stock of what exactly they want to do in life. Can you retire earlier than you thought? Pay off your mortgage early? Do you have enough savings? How much is enough life cover? There are many more questions I have been asked and I have been working with clients to try and help them achieve their goals.

As a result, I am finding it now that more and more people are requesting a full Financial Planning review of where they are right now and looking at different options for the future. This process is a lot more straight forward than people might imagine and further information can be found on https://www.drumgoolebrokerage.ie/planning.

1.    You fill out a financial planning statement online, clarifying your personal and financial goals. This is a comprehensive planner and will include anything from the cost of your utility bills to the cost of birthday presents.

2.    Once you have submitted the planner, I review and prepare recommendations and advice.

3.    We discuss these goals, your current financial situation, and strategies to make your goals attainable.

Following this, you decide what step to take next. This plan is just the first stepping-stone and once you have a strategy put in place, we can review this annually with you to see how it is progressing.

I find that one way to handle your personal finance is to treat it like a business. You (and your partner) are the directors of your business. A good business will forecast what is due to come in and out on a monthly basis. It will also have a reasonable idea of what to expect in the longer term, while ensuring that it has the correct provisions and protection in place to carry them into the future….even with some bumpy, challenging times along the way.

Opportunity knocks…

Recently a client who has a Mortgage Protection policy through my agency, missed a direct debit for his premium. This can happen for any number of reasons and is easily rectified. In this scenario there are usually two options; pay the outstanding premium or take out a new policy.

So, I gave him a quick call to let him know but just before I phoned, I checked my system to see if there was a better alternative available. I did a quick review and I was able to offer his family more cover and additional benefits at a reduced price.

The main reason for this is because at different times major life assurance companies will add benefits to policies and have special offers available to me as a broker that I can then pass on to my clients. This is particularly beneficial for clients of mine who have initially taken out their Mortgage Protection policy through a bank or went directly to a life assurance company. Quite often when I review policies that clients have taken with these companies, I can offer them more value for their money.

It is a very straight-forward process to apply for Mortgage Protection. I email an editable PDF application to the client and when I receive the completed application form back, I upload it to a system which sends the client a link to complete a digital signature. This is as simple as typing in your name and is a secure way of signing your application.

This digital application tool has been in the pipeline for some time, but social restrictions over recent months has pushed companies to make this option available now. So, although I may not be able to meet face-to-face, the option to complete an application has become a much easier process!