Name: Jim and Liz Hopkinson, and family

Occupation: Probation officer and occupational therapist

The problem: The arrival of daughter Eleanor last year has made the Hopkinsons rethink their financial goals.

The advice: Once they have worked out a budget and provided for a cash reserve and protection plans, the Hopkinsons will find it easier to select investments to meet their goals over short, medium and long term

Jim and Liz, who live in Leicester, became a family in August with the arrival of their daughter Eleanor. Their thoughts have now turned to planning for the future.

Jim Hopkinson earns pounds 21,300 per annum while Liz Hopkinson intends to return to work in May for around pounds 10,000 per annum, leaving the family with a lower income than it has so far enjoyed.

Their mortgage is with Halifax, for pounds 40,000 on a house they bought for pounds 57,000 in 1994. Part is on a repayment basis and part is interest only, with a PEP as the repayment vehicle. They are concerned over the introduction of the Individual Savings Account (ISA) and the end of PEPs in 1999, which impact on their repayments.

Their other savings are in Tessas, National Savings accounts and a selection of building societies - to benefit from future "windfalls". They would like suggestions on how to save money for their daughter, for when she reaches 18.

The Adviser: Steve Buttercase, of Maddison Monetary Management, a firm of independent financial advisers with offices in Bagshot, Bath, Cambridge and Nottingham. Telephone 0800 0742233.

The Advice: It is often a happy event, such as the arrival of a new baby, that can lead to a great deal of financial stress. The freedom of two incomes and fewer responsibilities is suddenly replaced by one income and probably the greatest responsibility you can have!

My first recommendation is always to do an accurate monthly budget and determine where the money goes each month. Jim and Liz live quite frugally by their own admission and have a monthly surplus of pounds 400. This has led to them accumulating savings of nearly pounds 40,000 in different accounts.

I would suggest that they maintain a cash reserve that equates to three months' outgoings. For Jim and Liz this is roughly pounds 3,000, which should be on instant access to allow for emergencies and opportunities.

Mortgage: As their mortgage is currently with Halifax they may wish to opt for a fixed rate of 6.25 per cent to guarantee their main outgoing for five years. At present, they have pounds 20,000 of the mortgage covered by two pounds 70 per month PEPs with Halifax Life. They felt PEPs would perform better than endowments and were more flexible, although they now think perhaps one of the PEPs should be with another provider.

There is an option to convert the whole mortgage to a repayment basis or even consider an endowment policy to replace the PEP mortgage - theseinclude life cover, which is more relevant now they have a daughter.

Protection: The next area to consider is adequate protection against the nastier things in life. This means insurance against illness, disability and death. Jim has a permanent health insurance policy that pays out after 52 weeks deferment. This is because his previous job would have paid him an income for one year.

Jim changed employer in January and will not qualify for sick pay for two years. My suggestion is that he talks to his existing provider about reducing the deferment period and what the new premium would be. Scottish Widows offer a deferment of eight weeks, so it may be sensible to see if a better deal can be obtained once his current provider has replied.

Jim should also consider critical illness cover that pays out a lump sum rather than an income on diagnosis of certain conditions. For life cover, Jim would be wise to consider Family Income Benefit, which pays out regular income to the surviving spouse rather than a lump sum.

Pensions: Jim has left his previous pension scheme after four years' service. He also contributed pounds 50 per month into AVCs while a member. He has the chance to join his new employer's scheme with Pensions Trust but asked whether it may be better to take out a personal pension.

My recommendation is to join the scheme even though the employer is prepared to contribute into a personal pension plan on Jim's behalf. This is because the scheme has very low charges and offers death in service benefits. Jim expects to be with this new employer for around seven years.

Saving for the future: The next question was how best to save money for Eleanor's future. Jim is considering a PEP with another provider and hopes to save around pounds 150 per month. He also asked about life assurance- based savings plans.

My suggestion is a bit of everything! A plan that is affordable and matures on Eleanor's birthday would be tax free and could be written in trust for the child. To spread the capital around, I suggest they consider pounds 10,000 into National Savings - the 12th index-linked issue. They could also consider maximising their PEP allowances over and above the regular savings and topping up their Tessas - these remain good investments to take advantage of prior to the launch of the ISAs.