Financial advice for new parents isn’t hard to come by, but most people get information from friends and family. However, fewer than half of all Americans aged 55 and over have retirement savings, according to a US Government Accountability Office study, and those age 55-64 who do have money set aside have a median amount of just $104,000. Moreover, NerdWallet reports that the average household is carrying around $132,086 in debt, including $15,310 on credit cards, for those who utilize revolving credit. In other words, following the pack isn’t going to help you provide for yourself or your child. You have to break free from the traditional financial tips for couples and learn how to manage your finances better than your peers do. To get started, follow the five bits of financial advice for new parents outlined here.
Reevaluate Your Estate Planning
Although nobody likes to think about what will happen if they become incapacitated or pass away, planning for the worst will protect your family if the unthinkable happens. This includes things like:
- Writing a Will
- Purchasing Life Insurance (For Both Parents and Baby)
- Purchasing Disability Insurance
- Writing Durable Powers of Attorney (DPAs) and Living Wills
- Establishing Trusts
Automate Investments and Savings
Automation is one of the best financial tips for couples, regardless of whether they’re expecting or not, because it simplifies life. Once a baby arrives, though, the time saved by using automated tools is gold. The options available today include incredibly precise algorithms, designed to maximize returns, while minimizing money spent on management. They’re also easy to use and accessible on the go, so you can manage your finances and investments between meetings or check to see how they’re doing while you’re pacing the floors during those 2am wakeup calls.
Continue Saving for Retirement
Another key piece of financial advice for new parents is to put your needs first. When children come along, moms and dads are often tempted to start saving for their little ones, but the family’s needs must come first. Operating on the expectation that you already have enough liquidity to handle emergencies, retirement should be your top priority. Although it sounds selfish, it’s actually one of the most generous things you can do for your child, as it ensures he or she will never have to worry about your financial needs as you age. “Always try to add money to the retirement savings even when shirts, shoes and maybe a gift for the baby might seem as a priority. Over time, life will make you realize you need much more for retirement than previously thought. Remember your children will have their own children in the future as well” says Freddy Martinez, owner of Forem Investments, a wealth management adviser from Miami, Florida.
Establish a College Fund
Lam Thuy Vo put together an excellent piece for the Wall Street Journal that breaks down the cost to raise a child from birth to age 18. The data presented comes from the US Department of Agriculture and shows that the average middle-class family will spend $245,340 per child, but high-income families spend $407,820, and in some parts of the country it climbs closer to $500,000. This doesn’t include college at all.
“Even the top one percent may get a panic attack from the latest projected tuition rates,” says Stephanie Landsman of CNBC. Her research turned up a father who anticipated he needed to be saving $3,300 per month to send his three children to a nearby state university, provided they begin attending in the year 2030. With high increases, the rate for in-state public tuition will be roughly $57,609 by then, with private tuition climbing to $130,428. Kelli B. Grant, also of CNBC, looked a little bit further into the future and predicted that a student beginning college in 2039 could expect to shell out $300,000 over four years. Her research suggests that college tuition hikes will slow over the years for most, but not likely for those who attend Ivy League schools. If you’d like your child to attend your alma mater, check the tuition rates today and add 2% on for each year between now and when your child will attend.
Remember to Enjoy the Finer Things in Life
Although it probably sounds like counter-intuitive financial advice for new parents, taking time out to enjoy life is absolutely essential. These moments with your children will pass in the blink of an eye, and you should soak up every minute that you can with them. At the same time, maintaining a balance between work and life will actually make you a more productive person in the hours that you do work. So, for the sake of your happiness, and for your pocketbook, make sure you take time away and spend it doing the things that you enjoy.
Having a child will reshape your world and will undoubtedly change your financial goals, but the modifications that come should be deliberate and made with intention. Should you find yourself unsure of how to best diversify your investments or how to divide your savings, don’t be afraid to seek out a professional who specializes in providing financial tips for couples. A fiscal checkup can help ensure you reach the goals you set, so you can continue to live comfortably and your children get the start in life they deserve.
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