Are you financially independent in your own right or are you relying too much on your husband?
Have you ever stopped to consider that nearly half of all marriages end in divorce, that some people die young, are made redundant or end up incapable of working. In all those cases we women really need to consider our own financial security, separate from our partners’ and need to check whether our family finances would survive.
In many cases women don’ t think about this, and feel perfectly safe. In some marriages, the financial side is left to one partner entirely with the other partner having little or no idea of what assets and pension funds there are. It doesn’t necessarily start like this when they marry, but it often evolves during a marriage, when children are born and life gets busy. Then, before you know it, it’s you that doesn’t know enough about finances. Do you fall into this category?
Here are some areas that you need to consider when thinking about your own financial security.
Are you protected?
Financial protection is always the first area that I consider when looking at financial planning. In many cases one partner is the main breadwinner and may have protected themselves in the event of long term illness or a critical illness but what about if the other partner were ill?
If you are the one with no or a lower income and also look after the children and you were to get cancer for example meaning that you had to go through horrendous chemotherapy treatment, who would look after the children? Just because you aren’t the main earner doesn’t mean that you don’t need to be protected. The cost of childcare is high and if you were seriously ill and couldn’t look after the children, this would need to be paid for.
1 in 8 women will get breast cancer and 1 in 3 people will get cancer. It is vital that you are protected financially and not just your husband. Yet 4 out of 5 people have no critical illness cover and 9 out of 10 people have no income protection.
In case you are divorced, it is to reconsider your arrangements for income protection. For instance it would be vital to have the breadwinner covered for the maintenance payment that they make to you in the event of his illness or death, so that you were not suddenly left without the maintenance payment.
Have you got your own rainy day account?
Many women do not have any money in their own name and everything is either in joint names or their husband’s own name. But, what if things went bad between you and he emptied the joint accounts meaning you had no access to any money? How would you afford to get legal advice?
And, what if your husband was suddenly taken ill or passed away and you needed to get access to money but it is all in his name? It is so important to have your own money. I would recommend it is prudent to have 6 months income aside in an account in your own name but as a minimum you should have 3 months income put aside.
Are you taking care of your own retirement or relying on your husband?
If you have had years out of work to look after the children you will have missed vital contribution years to your own pension. Are you even opted in to your employers pension scheme? If you are self- employed, do you have your own pension pot?
Scottish Widows, a pension provider undertook it’s annual research into women and pensions found that in only 15% of cases where women have been through divorce; pensions were discussed as part of their divorce settlement and 78% of women said that they did not know what they were entitled to from their partners pension if they divorced. I find these statistics very worrying.
The report states that for women with little or no pensions savings, divorce could mean that they end up relying on the state or their own meagre savings in retirement.
The report goes on to say that 26% of women are saving nothing towards their retirement and yet 44% said they would be angry if they were still working at age 65 and 79% said they would be angry if they were still working at age 70. So as you can see, it’s very important that you have your own savings.
As of October this year pensions auto enrolment started in large firms. Auto enrolment means that all qualifying employees will be auto enrolled into their company’s pension scheme. This will take place over a number of years until February 2018 when all employers will have to auto enrol their employees into a pension scheme.
There will be a phasing period where the amount that you will need to contribute will gradually increase starting at 2% of your salary. By October 2018, you will need to pay a minimum of 4% of your salary, your employer will pay a minimum of 3% and you will get 1% tax relief from the government.
You will need a financial adviser who specialises in pensions to advise you on what you are entitled to and how to go about it. They will work with your solicitor to ensure that you get the best outcome.
Budgeting and paying the bills v knowing what your assets and liabilities are
Do you control the monthly budgeting? It’s really important to have a handle on this and understand what assets your husband has as well as how much debt there is as this could have a huge impact if you were to be faced with bereavement or divorce.
Have you made a will?
According to research undertaken by The Telegraph in October 2009, 2/3rds of parents with children under 18 have not got around to making a will. Many married couples assume that the assets will automatically pass to the surviving spouse on death, but this is not the case if you have not made a Will.
Without a Will, your assets are subject to the Rules of Intestacy, which are complex and means the money is unlikely to end up where you think it will or want it to. The problem is even worse if you are not married. In the case of unmarried partners, the surviving partner is entitled to nothing without a will. Many people believe that if they have lived together for years they are common law husband and wife. This is a myth and there is no such thing!
The most important consideration is the guardianship of your children. If you are married, what if you both died? Who would look after the children? If you are not married, you need to make provision for your partner and for the children. If you have not specified this, there can be huge problems on death with potentially the courts deciding who brings up your children. This would be incredibly stressful for all involved. If you do not have a will, children will usually go to next of kin, which might be what you wish, however it is better to consider this up front.
Author: Hannah Foxley of The Women’s Wealth Expert. Hannah has 10 years experience as a financial planner and is both Chartered and a Fellow of the Personal Finance Society. She specialises in giving down to earth financial planning advice to women and in particular those facing divorce. She brings empathy and understanding to financial planning through her own personal life experiences and can help you navigate this tricky world in an easy to understand and practical way that will leave you feeling secure. Hannah@thewomenswealthexpert.co.uk