Wealth Check: 'Can we have it all - less work, less debt, and kids?'

The problem: How to start a family and go part-time
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The Independent Online

As a young couple planning to have children in the near future, Emilie Taylor, 25, and Rob Lowe, 26, from Sheffield, are keen to get into a position where they can cut their working hours.

"We would like to start a family before we're 30," explains Emilie. "With children, we would both want to work part-time ideally - three days each, with childcare from grandparents on one day."

Emilie, who works for a drugs rehabilitation charity, is prepared to consider extra sources of income to help fund their aspirations.

Having already run community art groups at £20 an hour, she's also planning to make and sell her own ceramic artworks, although she will need to spend £1,000 on a kiln and small studio in her garden shed.

The couple have other concerns about their financial future. Despite their £41,500 combined income - Rob is a primary school teacher - they have no savings. "We do manage to put aside around £300 a month between us, but it all goes on the house", says Emilie.

They paid £99,500 for their three-bedroom property last year and fork out £520 a month on the repayment mortgage (longer than normal at 30 years.)

Their current deal is a two-year fix with Bristol & West at 5.05 per cent, which runs until March 2007.

Emilie and Rob are keen to cut their mortgage term to 20 years to pay off the loan as quickly as possible.

The couple have other debts to contend with - including student loans totalling £9,450. Rob also owes £1,170 on his HSBC credit card at 14.9 per cent, and is overdrawn by £1,500 on his HSBC graduate account; this is interest-free up to £750 and then 14.8 per cent above that.

While Rob contributes to the Teachers' Pension final salary scheme, Emilie has yet to start paying into a pension.

At present, the couple do not have any life cover. "We did try to get some protection in place," says Emilie. "But the fact I had a kidney removed when I was a child has made this tricky."

The cure: You can't both give up the day job

The couple's plans to start a family before they are 30 while working part-time are unrealistic, warns Colin Jackson at independent financial adviser (IFA) Baronworth. "Once they are parents, they'll need as much income as they can get."

Given that they also want to reduce their mortgage from 30 to 20 years, it's likely they will both have to keep working full-time - or consider delaying a family for a few years.

A compromise is possible, though. "If just Emilie worked part-time, she could use her time at home for her ceramics and produce some income to make up for her drop in salary," says Mr Jackson.

"Rob could also look into supplementing his income through private tutoring."

Debt

Philippa Gee from IFA Torquil Clark urges the couple to "fast forward" their effort to tackle their debts - so they can concentrate on saving again.

"Focus on the borrowings that carry the highest interest rate ," she advises. The interest on Rob's credit card debt and overdraft is greater than that which he could earn on any savings account, so he should first wipe these debts out.

Since the rate on student loans is linked to inflation - and currently stands at only 3.2 per cent - the couple should continue paying this off every month, as they are doing at present.

Savings/investments

Ms Gee recommends that Emilie and Rob carry out some basic budgeting to pinpoint where they can save more money.

She then recommends the couple build up a buffer sum to provide an element of stability. "They should be able to [find and] slot away £500 each month."

A mini cash individual savings account (ISA) lets investors contribute up to £3,000 a year tax-free.

Ms Gee picks out Alliance & Leicester's Direct ISA Issue 2, paying 5.2 per cent, though she adds that this is a variable rate and includes a bonus of 0.7 per cent that runs out in April 2007.

Property

Given their financial commitments, it is unlikely Emilie and Rob will be able to increase their repayments sharply enough to shorten their mortgage term from 30 to 20 years, says Phil Mines from IFA Antrams.

Ms Gee suggests the couple consider a flexible mortgage instead. "This will give them the option of overpaying when they have the resources to do so - rather than committing themselves to a much higher fixed monthly payment."

A good time to make this change, says Mr Jackson, would be in late February 2007 - a month ahead of the end of their current fixed- rate deal.

Retirement

Robert is fortunate to have access to a final salary pension scheme, because the employer, not the employee, shoulders the investment risk.

"He should keep an eye on his salary within this scheme to make sure he is on track - so that if there are any shortfalls [between his pay and his expectations], he will have time to make them up," says Ms Gee.

She also recommends that Emilie check with her company to see if a pension plan is offered - to ensure she benefits from any extra employer contributions.

If not, it could be worth considering a low-cost stakeholder personal pension, which will her you make small contributions as and when she can - and qualify for tax relief.

Protection

Life insurance will become a much greater issue when Emilie and Rob become parents, says Mr Jackson.

Ms Gee says Emilie should again ask her employer if any life cover is provided as a work benefit.

If not, it is worth trying protection brokers such as Life Policies Direct or Lifesearch, which offer cover to people with medical complications.

Interview by Harriet Meyer

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