There are a range of events that are likely to result in a substantial cost to your family. In these situations it is best to be prepared and, if you can, it is advisable to begin saving for these events as early as possible. The earlier you start preparing, the less will be the impact on your family when the day arrives.
Depending on how you handle them, the following events can all be costly:
- Children’s schooling and University
- Care for elderly relatives
Weddings are traditionally very costly events, but nowadays extremely high costs of wedding can be avoided. Many people have stories of weddings they have been to where the outlay was exceptionally low and/or the guests helped to pay the costs, which does go to show that it’s all optional. However, for those who do not wish to stint, the costs can be daunting. Total costs of €20,000 plus would not be uncommon.
Children’s schooling and University
Putting children through schooling can be very expensive, particularly if there is any intention of using fee paying schools or where parents intend to pay the costs of university. Even where state schools are used, it is not unreasonable to expect that total costs over the entire schooling cycle, including university, may exceed €70,000.
Care for elderly relatives
Under the Nursing Home Support Scheme also known as “Fair Deal” launched in 2009, the State will defray a very significant part of the costs of care for the elderly. Only certain nursing homes are covered by the Fair Deal, but where these are used, the cost of care should not be as great a financial burden for families as it once was.
An individual looking to take advantage of the Fair Deal must first see a healthcare professional (e.g. a nurse) for a Care Needs Assessment. If this assessment concludes that there is a need for nursing home care, a Financial Needs assessment is undertaken.
Up to 80% of the income of the affected individual will be used towards nursing home costs. If this is not adequate, then up to 5% of the value of their assets will also be used. The balance of the costs will be covered by the State.
It is important to note that you are not obliged to pay the 5% of assets up front towards your cost of care, as the State will loan this to you for repayment after you die. In addition, your principal residence will only be counted towards your assets for the purposes of the 5% calculation for the first 3 years of care.
If you have a spouse or partner remaining at home, he or she will be left with a minimum of 50% of the joint income, or the State Non-Contributory Pension, whichever is greater.
More information on the Nursing Homes Support Scheme (Fair Deal) can be found on the HSE’s website.
Nursing homes covered by the Fair Deal include both public and private facilities. You should note that some homes are not covered by the Fair Deal. A specific list of homes covered is available from the HSE’s site.
Techniques in Planning for Family Events
Where you know or suspect that family events may place a financial strain on you in the future, it makes sense to save towards them.
Where the event is likely to occur in the near future, it is advisable to use a cash deposit facility for your savings.
Where the event is distant, it may make sense to seek a higher return on your savings than is available on deposit. If you choose to do this you should always bear in mind that aiming for higher return implies higher risk. Regular investment plans capable of delivering a return in excess of cash savings are available, and if successful may reduce the burden to you of saving for the event concerned.