Many people think of a carer as a paid professional who looks after someone who is elderly or unwell. However, in reality, the majority of carers are family members or friends who provide support without any financial compensation.
A carer is anyone, regardless of age, who supports someone who cannot manage alone due to illness, disability, frailty, mental health challenges, or addiction. Their help is often vital, yet unpaid.
According to Carers UK, data from the 2021 UK Census revealed there are:
- 5.8 million unpaid carers
- 1.7 million people providing 50 or more hours of care a week.
The largest group of carers in England and Wales falls within the 55 – 59 age bracket, often balancing care duties with work and other responsibilities.
Becoming a carer can significantly impact your financial situation. You might experience a drop in household income, face additional expenses, or need to revise your estate plan to protect key assets or account for new responsibilities.
So, read on to discover four reasons why financial planning is important for caregivers.
1. Budgeting and managing expenses
Providing care for a loved one often means your household income and expenses are likely to change, and it can be beneficial to create a new budget that reflects your situation.
For instance, you may experience a change in income if you reduce your working hours, take unpaid leave, or even step away from your job entirely. Or, you may maintain the same hours and salary, but experience financial strain due to the person receiving care leaving work.
Moreover, there may be additional expenses such as mobility equipment, home modifications, or medical bills that add up and put further strain on your household budget.
A financial planner can play a key role in helping you prepare and adjust to your new situation. They can work with you to create a realistic and flexible budget that allocates funds for both regular and unforeseen expenses without risking your financial stability.
This may involve exploring options such as withdrawing from your emergency fund, using disability or income protection insurance, or identifying alternative income sources.
In addition, there may be financial support available in the form of government benefits, tax credits, or local authority grants for both you and the person you’re caring for.
2. Planning for retirement
Taking on caregiving responsibilities can have a significant impact on your retirement plans as the time and financial commitment involved can make it harder to prioritise your own long-term goals.
Reducing your working hours or leaving employment altogether can affect your workplace pension entitlements and State Pension qualifying years, potentially resulting in a smaller retirement fund.
Furthermore, if you’re caring for a partner or family member with a long-term illness, your vision for retirement could shift entirely, and you might need to develop new goals based on your circumstances. For example, your ideal retirement may now be less about travel and adventure and more about stability and proximity to care services.
A financial planner can help you re-evaluate your retirement goals and create a plan that reflects your current situation. They can project your financial future based on your circumstances and explore strategies that can help ensure you are well-prepared for your re-envisioned goals.
3. Estate planning
Caregiving often prompts important conversations about the future, including how care responsibilities may impact the size and structure of the legacy you or your loved one can leave behind. Providing long-term care can involve drawing on savings, selling assets, or reallocating resources, all of which may reduce the value of an estate over time.
To protect both your own estate and that of the person you care for, it’s vital to review and update estate planning documents regularly. This includes ensuring that your wills are updated to reflect your current wishes and circumstances and that Lasting Powers of Attorney (LPAs) are in place for both financial and healthcare decisions.
You may also want to explore additional strategies to protect your estate, such as lifetime gifting, using tax-efficient investment vehicles, or placing certain assets into trust. These steps can help ensure that more of your legacy reaches the people you care about.
A financial planner can support you in making sure the necessary documents are up to date and that you make use of any allowances and estate planning strategies that support your legacy goals.
4. Reducing stress and uncertainty
Caring for someone you love often comes with high levels of emotional, physical, and financial stress. When you’re juggling appointments, managing medications, and supporting someone day to day, the added worry of staying on top of your own finances can quickly become overwhelming.
But with a clear, personalised strategy in place, you can gain a greater sense of clarity and control over your financial situation. A comprehensive financial plan that helps secure your future can reduce the mental load and give you one less thing to worry about.
Knowing you have a structured approach to managing money that accounts for both short-term pressures and long-term priorities can significantly ease anxiety. Instead of reacting to each new financial challenge as it arises, you can feel more confident navigating the road ahead, even during difficult times.
Ultimately, a solid financial plan allows you to focus more fully on what matters most: being present and supportive for the person you’re caring for, without sacrificing your own financial wellbeing in the process.
Get in touch
To find out more about how financial planning could help you and a loved one, get in touch.
Email us at hello@vwmwealth.com or call us on 0141 229 4004.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing. A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
