Mother’s Day 2019: Four ways to look after mum’s money
Forget the saccharine cards and weird teddies, this will really give mum a boost this Mother’s Day
Depending on who you believe, the average Brit will spend somewhere between £22 and £25 expressing their feelings for their mums this Sunday.
And while it’s not meant to be any more than a mere gesture, and while you’re sure to heap her with love and attention and the odd gift at other times of the year, it’s not even a drop in the ocean compared with the cash she’s spent or missed out on because of her kids.
Family affairs aren’t always about the money, but if you really want to treat mum this weekend, how about helping take away a few financial fears?
(No, it’s not anything like the same amount among dads. There are plenty of reasons why not, but that’s a different article.)
Here’s what you need to know about getting back on top of money matters...
What’s she worth?
If a mother, father or carer decides to take a career break to look after children, there are huge immediate and long-term financial implications.
But the one that’s regularly overlooked is protection. If the primary carer isn’t working they may not have products like life insurance, critical illness or income protection in place as these are often included as a workplace benefit.
“Families often consider protecting the income of the primary earner, without considering the cost of replacing the role of the primary carer which is equally as important,” says Rachael Griffin, tax and financial planning specialist at Quilter.
“If the primary carer falls ill or passes away, the surviving partner will need to re-evaluate their working hours or pay for extra support to cope with the increased responsibility.
“Having protection in place is even more crucial for a single parent whose children are totally dependent on their income. While both points apply equally to both genders, it disproportionately impacts women who typically take on the burden of childcare."
Banking the credits
Data from the Department for Work and Pensions (DWP) this week shows the gender gap in pensions income is getting worse, not better, with men now receiving 13 per cent more in pension income than women, worth an average of around £30 for every week in retirement for single men.
The difference is largely down to men spending longer in work, usually in higher paid jobs and building up their pension pots as a result.
But parents and carers can also get penalised for taking time out for the kids, and they may not realise until it is too late.
If a parent decides to take a career break to look after children, they could end up missing out on national insurance credits if they don’t claim child benefit.
Failing to register for NI credits could mean they don’t qualify for a full state pension, which requires you to have 35 years of NI credits.
“According to our research, men on average are saving almost double what women are each month towards their retirement (£301 vs £171 respectively),” adds Griffin. “It’s also worth noting that there is a growing trend of mothers returning to work after a career break as self-employed and as such are not auto-enrolled into a pension, making it imperative that these women save for retirement in an alternative way.”
Keeping it in the family
As UK families become increasingly complex it can be hard to keep track of who is legally entitled to what inheritance.
One way of ensuring wealth is passed down to the intended beneficiaries could be to place the money in trust, particularly if it has been earmarked for a specific use, such as education or a deposit on a home.
If a parent or carer dies without leaving a will – and around half the population does – the money would go directly to their legal partner who might not use the money as intended.
The power of the gift
Trusts can also be used to mitigate inheritance tax (IHT) because any money put into trust effectively sits outside someone’s estate which will help reduce their overall IHT bill. Meanwhile, IHT rules also allow “gifting” of up to £3,000 a year without the tax being applied.
Anything over this and the child might get charged inheritance tax unless the parent or carer survives for seven years after you make the gift, so it is worth gifting earlier on in life if you can.
It also means you get to watch your kids enjoy using the extra cash.