How good are you at managing money? As a mum, you’re not just in charge of taking care of your own finances – you’re often looking after the financial welfare of your entire family!
Mum of two Samantha Downes may be a financial journalist with several finance books and guides to her name, but that hasn’t stopped her making some big money mistakes in the past.
To help other mums avoid the same pitfalls she shares her top six money lessons.
Love it or hate it, we all need money
Whether we love, hate or worship it, we all need money. Some of are happy with just enough get by, some of us like having lots, and some (like me) like to have just enough that they know they can have the odd ‘treat’ (box of Belgian chocolates) from the Marks and Spencers food hall.
Now I’m not the greatest with cash, but I’ve got better thanks to getting into debt via a badly-thought out business plan back in 2002 and a liking for said M&S treats.
I’m also better with my money thanks to my frugal husband, a converted spendthrift who cooks from scratch most evenings and who insists we shop at Aldi, via the odd splurge on goats cheese in Waitrose (where it’s actually cheaper than most other places if you buy it from the cheese counter).
Look after the budgeting basics
We’ve taken our budgeting to the limit. Our wedding cost just under £1,500 and even then my dress (£75) was actually bought by my mother in law (which has just reminded me – I did offer to pay that back).
We don’t go on expensive holidays, although we are planning on going away next year. Something which we will book then pay off monthly – via a budget.
Over the years the resentment which I sometimes felt when I saw friends and family splashing out has faded, and I realise that hubby is right – look after the basics and the rest will look after itself.
I’m trying to learn lessons from my rich relatives!
I come from a family of entrepreneurs – several of my cousins (on both my mum’s and my dad’s side) have successful businesses. I’m not exaggerating to say some of them are millionaires several times over.
Now that I’ve got a family and have a business plan of my own, I’ve started trying to learn some lessons from them.
The one thing they all have in common is frugality. They go on nice holidays – often combined with a business trip – and have lovely houses, but they don’t do flashy and shop in all the usual places. The one thing they’ve all forked out for is their children’s education.
Some might call their way of living ‘classy’ but I couldn’t possibly comment. Many of them have nice cars but you will find they bought them after they paid off the mortgage. They are all self-made but they know the value of covering the basics first.
Six hard-learned money lessons for mums
So what has all this taught me – my experience as a financial journalist and author, and that of an ex-in-debt-mum? It all boils down to six hard-learned money lessons that can help us all to cover the basics.
1) Save up emergency cash
Before you do anything make sure you have at least three months’ worth of bills/mortgage/rent in the bank. Make sure you include basics like food as well and allow something for childcare – because even if you lose your job you are going to need to get out there for interviews.
Some of the best savings rates at the moment are in current accounts such as Santander’s 1/2/3 account which is paying 3%. Oh and don’t keep the cash card for the account in your wallet!
2) Have a critical illness and life insurance plan
One pays if you (or your children) get ill and the other pays out if you die. I took out ours with Friends Life via LifeSearch and it costs £60 a month.
I’ve opted for a cheaper form of life insurance known as family income – so it will pay an amount out to both my daughters on a monthly basis until they are 23 if I die before then. You can choose what age you want to take out the cover until – I opted for something that would help them through university.
Critical illness policies pay out should you get sick and can also cover your children so you can take time off work to look after them.
3) Think about long-term savings
I’m not saying the word pension but you might want to think that far ahead. If you don’t have a workplace pension then you might want to go and see an independent financial adviser. Better still, open a self-invested personal pension and teach yourself to invest.
An ISA is also a great tax-free way to save, as long as you can commit to saving the money (you can put £15,000 a year into one).
4) Have a luxury budget
Life is for living, so allow yourself some treats – after all no one else will do it for you. My monthly must-have is my gym membership of £44 a month, which also allows me to take my baby swimming for free after 2pm.
My other extravagance – which I’ve eschewed for several years – is having my hair highlighted. Now I’m back working full time I’m on the look out for a reasonable hairdresser who can make me blonder every 12 weeks (suggestions welcome).
5) Get private medical insurance if you can
If you can afford it, get private medical insurance for the whole family. This is not cheap, and is certainly a luxury, but is something worth considering. (If you’re lucky, it may come as part of an employment package for you or your partner.)
6) Have a financial hero
We all have role models for hair, makeup and fashion, so why not finance? I’ve already shared mine, I’m sure you all have ones too.
Samantha Downes is a financial journalist and the author of several finance guides and books. She also has her own blogzine Ella Mag.Samantha Downes