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Australian families are changing shape with the number of blended and step-families on the rise, bringing with it new financial challenges for today’s modern family.
The latest AMP.NATSEM Income and Wealth Report, Modern Family, reveals that blended and step-families in Australia now make up nearly twice the share of families they had in the 1980s^.
The new report finds step-families make up almost seven per cent of all couple families in Australia, and blended families four per cent, together accounting for almost 11 per cent of couple families.
Unlike single parent families, which account for more than a quarter of all Australian families with children, blended and step-families have the benefit of having two potential wage earners in the household. However, the report says they tend to be worse off financially than ‘intact’ families (those with two natural parents, biological or adoptive).
Blended and step-families often have lower rates of home ownership because each parent is more likely to have come into the relationship with their own complex set of circumstances.
Unlike the TV sitcom The Brady Bunch, the reality for many people in a new relationship with their own kids and step-kids is that their finances are under pressure and they’re often less likely to own a home.
Parents in blended and step-families are likely to be concerned about how to protect their wealth for their children and how to manage financial obligations to former partners and children living with another parent.
Here are some of the strategies blended and step-families need to consider, however as each family’s circumstances are different, it’s important to seek professional financial planning advice to help get your family finances back on track:
Prepare a budget
It might sound basic, but first and foremost it’s essential for new couples with kids do a budget and work out where their money is going. This is often one of the last things couples discuss in a new relationship, but having honest and open discussions around money and budgeting early on will pave the way for financial health.
Start reducing debts
Review all your debts and, where possible, consolidate these to save costs, especially with personal loans and credit card debts. A financial planner can then help you map out a plan to reduce your debts sooner than what you think.
Review insurances
It’s important to review all insurances (death, total and permanent disablement, income protection and trauma cover) to ensure your new family is protected in the event of a crisis. This includes updating beneficiaries named in life insurance policies and super accounts – if you forget to remove an ex-spouse from a life insurance policy following a divorce and you die, your ex could get your life insurance pay out instead of your children or new partner.
Estate planning
To ensure children and spouses in a blended family receive the inheritance of a loved one, a well-crafted estate plan is required. This can involve preparing or updating any existing wills, trusts and powers of attorney, as well as reviewing life insurances.
Consolidate super
Review your super funds and consider consolidating accounts if there are multiple funds to save costs and build your retirement savings faster.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.
^Source: AMP.NATSEM Income and Wealth Report, “Modern Family”, October 2013
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