From family planning to financial planning
When finances are already complicated by living away from your home country, expats should consider the wider financial implications when starting a family abroad. Our financial expert in Belgium offers some advice.
For expatriates, whose finances are complicated by living away from their home countries, appropriate advice on these matters is even more crucial.
Here are some pointers for expatriate parents wanting to keep their financial affairs in line with changing family circumstances.
Insure your lives
Not the most cheerful subject, but certainly one of the most important. The arrival of a child brings the responsibility to provide financial security. If you or your partner were to die tomorrow, would there be adequate financial support for your family?
Life assurance policies pay a cash sum to provide financial security if this were to happen.
If you are an employee, check whether life assurance is included in your benefits package. If so, will the amount be sufficient?
Don't be fooled into thinking that employer schemes will automatically provide the amount of protection you need. As a general rule, life cover should be sufficient to preserve your family's standard of living until your youngest child becomes financially independent. In many cases, that will be at least 20 years.
For the self-employed and those who don't benefit from an employer scheme, life assurance is cheap and readily available. Specific international policies cater for the needs of expatriates by offering flexibility and portability.
To give you a cost guide, a 30 year old male can insure his life for EUR 250,000, for 25 years, for around EUR 40 per month. A female of the same age would pay less than EUR 30 per month.
Given how affordable it is, all parents should make it a priority to ensure that they have sufficient life assurance in place.
Write a will
Keeping on with this rather morbid theme, a will is an important part of anybody's financial planning. Whatever your age; if you live in Belgium, own property and have young children, it is strongly advisable to write a will.
Belgian inheritance law includes the principle of 'forced heir-ship', meaning that there are rules to dictate who will inherit your estate on death.
For expatriate parents, a major benefit of writing a will is the ability to appoint a legal guardian for your children.
To write a will, you need to consult a Belgian notary. This process is neither costly nor time-consuming and will ensure that your family is looked after according to your wishes and not those of the Belgian state.
Protect your income
As with life insurance and wills, it's difficult to convince people that income protection is necessary until it's too late. Statistically though, people are far more likely to suffer from illness or injury during their lifetimes, than to die.
Unless you have a generous employer scheme or are confident that your family can survive on payments from the state, you should consider a private income protection scheme. This is particularly important for the self-employed.
As many young families often depend on one income for a period of time, some form of protection for those earnings is essential.
International income protection policies are available to expatriates and provide a regular income if you are unable to work due to illness or injury. It is usually possible to insure up to 75 percent of your current income which would be paid to you until you are able to return to work.
Save for the future
Sensible financial planning dictates that protection should come before investment. So once your family is protected, you might want to think about saving.
One of the major reasons for parents to save is to fund their children's education. For expatriates, the cost of education, particularly further education, should not be underestimated. Sending a child to university in the UK or USA is currently estimated to cost between EUR 20,000 and EUR 40,000 per year. Parents need to be aware of the cost and should be prepared to start saving as early as possible.
Savings plans are available to expatriates from both local and 'offshore' providers. You can generally find plans that offer good flexibility and allow you to pay low contributions, whereas offshore plans provide better investment options, tax free investment growth and global portability.
Those who dislike the idea of sacrificing some of their income might be comforted to note that saving only EUR 250 a month would accumulate the sum of EUR 148,000 after 20 years, assuming modest annual growth of 8 percent.
Don't forget your pension
Whilst parents must adapt their financial planning to cater for their children, it is important they don't neglect their own long-term pension provision. If family income allows, every effort should be made to save for the future.
Various personal pension plans are available and are good places to start saving if you intend to stay long-term. These products generally offer tax-deductibility on contributions and a guaranteed rate of return.
In addition, offshore insurance-based 'wrapper' products are highly attractive investment vehicles for expatriates. These products provide a wide range of investment options, centralised administration and the possibility to take withdrawals of capital which are not taxable in your country of residence.
The arrival of a child can turn your world and your finances upside down. Having an extra mouth to feed not only increases daily expenditure, but also increases the need for appropriate financial planning. For expatriate families, sound advice tailored to meet individual needs is even more essential.
It's impossible to plan for every eventuality but addressing each of the above issues can go some way to ensuring a secure and prosperous future for you and your family.
Tim Bichard / Expatica
Tim Bichard is a Senior Adviser with Fulcra International Financial Planning in Brussels. For further information on any of the above, he can be contacted at firstname.lastname@example.org or by telephone at +32 (0)2 639 5466.
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