Welcome to the weird wild world of parenthood! This is the most rewarding experience you will ever have in your life, though that part might not hit you right off the bat. As a four-year veteran dad of two boys, I am far from having it all figured out. Everyone has heard about the terrible twos, how hard it is to get a full night’s sleep, and all of the… poop. Here are a few things that I didn’t see coming in the early years, and a few tips to make sure you are being financially responsible:
- Start saving for college – like, now. Do not wait to open a 529 plan. The biggest advantage of 529 plans is that they have tax-free growth potential if they are used for higher education expenses. If you earn 7% over time, every $1,000 that you contribute when your child is born will be worth $3,379 when he or she turns 18. The longer you wait, the less it will grow. According to a recent study by Fidelity, parents who work with financial advisors have 70% more money saved for college than those who don’t. The reality is, you probably can’t afford NOT to start saving now.
- Eating out is a huge challenge. On top of the obvious reasons, I have found that amidst all of the craziness your family adds to a restaurant setting, it won’t stop complete strangers from approaching you and telling you everything there is to know about their kids or grandkids, completely unprompted. They are usually completely oblivious to the fact that you have 1 kid screaming, throwing food all over the place and the other is under the table licking the floor. Or the fact that you are in the process of eating your food as fast as you can so you can get the check before management asks you to leave. In time, you will have mastered the art of finishing your meal in under 7 minutes.
- Create and manage a budget. The biggest decision that will impact your day-to-day life is your childcare situation. Determine what works the best for your family and build around that. Odds are, cash flow will never be tighter, so don’t over-extend yourself financially. It is important to set aside a reserve fund for the unknown, so try to keep 3-6 months of living expenses on hand. If you want to dig deeper, check out my blog about managing a budget.
- If you just have the life insurance provided by your company, it probably isn’t enough. Think about the numbers. If your income stops and your family’s expenses continue, that is a big problem. At this point in your life, your life insurance need will probably never be higher. You have the most remaining years of support that you need to provide, including your spouse’s retirement, college costs, and the mortgage. The good news is, term insurance is inexpensive and easy to shop. Permanent life insurance is a nice option if you are looking for a cash accumulation vehicle, but it doesn’t always make the most sense. Do the responsible thing and get it done!
- Everything is going to be a mess at all times. Their hands are sticky. They touch everything in public restrooms. Our first was a serial projectile vomitter. It was so bad, we eventually had to sell the house and move to a house with no carpet. The kids will invent new ways to blow up your scene every single day, and by the time they go to bed, you’re too exhausted/indifferent to keep up with the cleaning. I have no advice to offer here except to get used to living in filth and constantly being sick.
- Make sure you have the basic estate documents in place. Should tragedy occur and you leave this world unexpectedly, you don’t want a judge to be the one who decides what happens with your affairs. Meet with an attorney and draft the proper documents. Make sure the right people are in line to take guardianship of your kids and take responsibility for their finances. Any assets or insurance proceeds you pass along should fall into a trust for your kids’ benefit. Even if you don’t have the perfect answers in mind – your best instinct today is better than putting it off and never getting to it. Get it done.
G. Adam Weingartner is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisoryservices offered through Lincoln Financial Advisors Corp., a broker-dealer (member SIPC) and registered investment advisor. Bluestone Wealth Partners is a marketing name for business conducted through Lincoln Financial Advisors Corp. CRN-3280834-101220.