Financial Planning For New Parents
There is no denying that a new baby is a game-changer for all rookie parents. A baby’s birth signals the time when a couple becomes a family. It is also the time they become responsible for the well-being of another human being. Of course, it involves the immediate challenges of keeping your baby fed, clean and physically safe at all times. But it is also taking care of them financially both now and until they come of age (although, of course, many couples support their children financially way beyond 18) where expenses become steeper.
Here at Infinity Solutions, we believe in giving every new parent access to proper financial advice to help them create their financial strategies or retirement plans in case of the arrival of unexpected life events. We also teach the steps of making a long-term financial strategy for new parents to help them ensure the future of their children with life insurance plans.
We have pinpointed five must-dos for all parents looking to safeguard their children’s financial future and well-being.
Financial Budgeting or Planning
Parenthood, or the birth of a child, is often the wake-up call many people need to get their household budget and finances in order and start a savings account for their family. Unfortunately, it seems acceptable to wing it through the months when you only support yourself, hoping that you spend less than you earn. However, having a baby changes everything.
Babies may be tiny, but they are surprisingly needy and cost a lot of money. Children need a cot, a buggy, regular new clothes, nappies and food, all at a time when the family income often falls. This situation is brought about by a parent’s reduced work hours to care for their baby. It could also mean that disposable income has decreased because they need to pay for childcare needs. An experienced financial planner would recommend parents work out a cash flow analysis by documenting their income against their fixed and variable costs. If necessary, they should identify areas where they could save to cover the extra costs they now have, including education expenses.
In terms of budgeting, one common mistake is that parents assume that they will go back to work and get on an even keel quickly. However, this isn’t always possible, especially if there are complications after the child’s birth. In such cases, it may take a year or more before a parent can return to work and go back to being able to start saving money for their kid’s future.
Work Out Your Estate Planning
As a parent, the thought of your child being orphaned is terrifying, which emphasizes the importance of an estate plan. Fortunately, the chances of that happening are low, but the possibility does exist, and precautions need to be made. There are two things a family must do regarding their estate planning.
Firstly, you need to officially nominate a guardian who would be responsible for your child and their expenses in the event of your and your partner’s deaths. If you fail to do this, the decision is left to a judge, who might have a different opinion than you on what is best for your child.
Secondly, you need to make a will. Do not assume that your child would inherit your estate or investments. Making a will is the only surefire way to ensure that your wishes are known and adhered to by the person or authority in charge.
Become a Member of a Life Insurance or Health Insurance Plan
While we are on the unpleasant subject of dying, entry to parenthood is also the time to plan out your life or disability insurance. If you don’t have any, you’ll need to put some in place, and if you do have life insurance, it will probably need reviewing by a certified life insurance expert. You should take out sufficient cover to maintain the standard of living of your family if you were no longer around to provide for them. It can be tricky figuring out what amount of money to put away, which is why we always advise consulting a professional financial planner for assistance. These types of insurance can help pay for childcare expenses in the unfortunate event of your death.
If you have a spouse or partner, it’s essential to use your money to take out a life insurance plan to have a sort of emergency fund. When your kids are all grown up and leave home, you might find that they no longer depend on your income. Unfortunately, the opposite could also happen: they may still be in their 20’s when one of you, their parents, dies unexpectedly. Financial planning for all new parents should include a review of existing policies considering unexpected life events and a discussion about whether you have a plan to pay for any additional cover that needs to be put in place for your family.
Child Education Fee Planning
It’s the parenthood cliché you’ll hear thousand times over, but before you know it, that tiny bundle will be taller than you, done with kindergarten and heading out the door into the real world. Of course, college expenses will need to be paid if a university is on the table – and it is the most common way to give your child a head start in the jobs market.
It is far less financially painful for a family to plan and spread the six-figure cost of university education over the 18 years or so between the birth of the child and starting a degree by having college savings than having to put out the total amount when your child turns 18. Infinity Solutions has helped thousands of parents with education fee planning and is willing to apply its expertise to your unique situation.
With the company’s help, families will be able to get the assistance of a certified financial planner to conduct an assessment and make investment management suggestions on how a family can handle their money and have an emergency fund. This is to ensure that the investments they make and the money they spend take into consideration their baby’s future.
Future Access to Pension
Your child’s financial future is essential, but so is the matter of your finances for your own future, such as retirement. A common mistake many parents make with their partner is to stop paying into a pension or retirement savings fund to cover the costs related to their child. Financial experts advise people not to do this. Instead, you must continue your retirement planning and have enough money to pay for your living expenses after you stop working.
This is to ensure your financial independence once you retire. In a roundabout way, this is an excellent gift for your child too, as it will relieve them of the burden of having to support you later in their lives, although they won’t appreciate this particular gift for a long time! If you are not already saving towards retirement, you need to factor this into your budgeting and take steps now.
New babies can be all-consuming, physically, mentally and financially, but make sure you carve out time to get to grips with your finances and address the five areas outlined here. Having a plan to get everything in order will give your child the best possible financial future. You’ll also be turning yourself into a brilliant role model for them to follow and pass on to future generations.
If you would like any assistance with addressing any of the above areas of your financial planning or life costs or expenses, our professional advisers are here to help. Many of them are parents themselves, and all of them have a wealth of experience assisting expatriate families in Asia with holistic financial planning to meet all their goals. Contact us to arrange an initial chat.
New babies can be all-consuming but make sure you carve out time to get to grips with your finances and address the five areas outlined here. Getting everything in order will give your child the best possible financial future and you’ll also be providing a brilliant role model for them to emulate and pass on to future generations.
If you would like any assistance with addressing any of the above areas of your financial planning, our professional advisers are here to help. Many of them are parents themselves and all of them have a wealth of experience assisting expatriate families in Asia with holistic financial planning to meet all their goals. Contact us to arrange an initial chat.
A leading provider of expat financial services and wealth management services across Asia.