MONEY MAKEOVER

Name: Sean Brosnan Age: 34 Job: Payroll manager, Thames Valley University, Slough Salary: pounds 25,

Babies might be cheap to make, but bringing them up is not. Sean and his wife had their first baby, James, a month ago. Gifts of money have been coming in for James from his relatives, and Sean wants to know how he should invest these for his son.

"I would like to know what I need in terms of adequate life cover and a long-term savings plan for him," Sean says. "I also want to review the will situation now I'm married and have a family."

Although the couple will buy things James needs as they go along, it is for the major outlays such as their son's education and family holidays that Sean really wants to put money aside. Sean already has a number of investments, some in funds such as unit trusts and some as shareholdings in individual companies.

Rebekah Kearey, an independent financial adviser at Roundhill Financial Management, says: "New responsibilities mean Sean has got to look at a number of things now. He already knows he has to look at insurance in general, medium-term investment to pay for his son's education, short- term investment to pay for holidays and children's savings accounts. He also knows just how vital it is to have a valid will. Really, he should consult a reputable IFA so the situation can be assessed and monitored.

He pays about pounds 265 into his savings each month, but his portfolio seems to have been created on a rather ad hoc basis. Most of the unit trusts he invests in are very volatile. Sean says he is medium in his attitude to risk so he should be more cautious.

Sean and his wife won't be able to fund a complete private education out of the income they get from their investments. But investments will be able to pay for extra-curricular activities and it would be a good idea to invest for further education. He should set up a general portfolio of investments for this. Equity, or stock market, investments are the best value for money as long as they're kept for a long time. Sean has chosen quite a volatile portfolio of equity invest-ments and he should temper it with lower-risk investments when he adds to it.

He hasn't made the most of personal equity plans (PEPs). A PEP is a way of holding shares or parts of share funds without having to pay tax on your investment income, up to certain limits. A product such as the Skandia MultiPEP would be good for Sean. It gives access to the funds he already contributes to plus many more, all under the tax-efficient wrapper of a PEP.

There's no better place for short-term savings (for holidays etc) than building society deposit accounts. But Sean could get better interest rates at the Cheltenham & Gloucester or Sainsbury's Bank than he gets now on his Alliance and Leicester account. In terms of children's savings, if money is invested in James's name, it will generally have to stay in rather cautious places such as National Savings, the Post Office or friendly societies. If Sean invests the money in his or his wife's name, there are more opportunities for longer-term growth, and the investment can be put in trust for his son. If grandparents are giving money, they should give it directly to James to avoid tax implications.

One thing that might happen between now and Sean's retirement is long- term ill health. He gets an excellent income replacement package from his employer, and this could be topped up with a scheme which kicks in after one-year's ill health. A contract like this would cost about pounds 12 a month and give him half his salary. Death is less likely, but probably more devastating for his family. Sean should get adequate life insurance cover - at least until the children are grown up. The cover should produce an income which can rise with inflation and replace his current salary. Existing life insurance cover needs to be topped up by a further pounds 250,000 in an ideal world. An 18-year policy to produce this would probably cost around pounds 26 per month. Sean should insure his wife as well as she is an equal bread-winner"

Rachel Fixsen

Rebekah Kearey is an independent financial adviser at Roundhill Financial Management in Brighton (01273 674614).

If you would like a "Money Makeover" please write, including your name, age, job title and the reasons you need advice, to Money Makeover, Features, The Independent, 1 Canada Square, London E14 5DL, fax 0171 293 2182.