There are a variety of changes that come with being a new dad. Many you’ll never be able to prepare for in advance, while others you can start working on in advance of your new arrival. Here are five financial tips for new dads that I myself found to be useful as an expectant father.
#1 Emergency fund
With kids come emergencies.
Yes, no matter how good a parent you are, it is unavoidable.
If you don’t implement anything else on this list, at least make sure you have an emergency fund. An emergency fund is having at least six months of living expenses in the event an emergency happens (unexpected/expensive hospital stays, job loss, injured and can’t work…etc.). As many of us are the providers for the family, you can not be caught empty-handed when your family needs you – so start saving in advance.
Another valuable financial tip for new dads would be to consider looking for an online high-yield savings account to hold your emergency fund. NerdWallet usually has a good list of the current highest-yielding savings rates available. Be careful to read the fine print on whether there is an account minimum or monthly contribution required to get the stated rate at your chosen custodian.
#2 Life Insurance
Now that there is more in the picture than just you, it’s time to start putting together a contingency plan on how your family will be taken care of in the event that you blast off earlier than expected.
You don’t want your significant other to be forced to go out and wrangle for cash so they’ll be able to keep the house and put food on the table. That’s where life insurance becomes helpful. It – at a minimum – can buy the surviving partner some time to gather their thoughts and get their life back on track.
Term insurance is going to be the most cost-effective product on the market. Term life insurance guarantees payment of a stated death benefit to the insured’s beneficiaries if the insured person dies with a specific period of time, for example, 20 years.
How much term life insurance does an expectant father need?
A good rule of thumb when considering the amount of insurance to purchase is to add all current debts (mortgage, student loans, cars…etc.) plus 10-15 years of your income.
How long a term should my life insurance policy be?
When figuring out the length of the term that is appropriate for you… it depends. Some people are most comfortable covering themselves through age 65-70. Others just want to make it until their youngest is through school or until the end of their longest debt payment.
If you are preparing for becoming a dad for the first time, you may want to think about working with a fiduciary financial advisor, not an insurance agent, to figure all this out. A fiduciary is committed to putting your best interest first and seeing the overall picture, not just selling you a policy to get a commission. Life insurance is part of an overall financial plan, which will include all of your family’s financial goals.
Before meeting with anyone, it’s a good idea to do your own research. Since cost will be a big determining factor in that decision, you can search sites such as Policygenius to get a quote on different amounts and terms.
#3 Estate Planning
A estate plan is a set of legal documents that plots the course in the event that you were to pass away or become medically compromised. It usually includes such documents as:
- A will and testament
- Designation of guardian
- Power of attorney
- Health care proxies
- Letter of intent
Estate planning is important because it allows you to make sure that your assets would pass to the correct beneficiaries. If you don’t have a will, your estate could pass to probate and cause delays in your heirs getting their inheritance. Or, your children (if you wind up having more than one) may fight over the inheritance. Your estate plan also includes a list of all your accounts, etc. which will help you avoid leaving your spouse in the dark about where to find the money.
This is all a long way of telling you another important tip for new dads: get an estate plan together before the baby arrives.
#4 College Savings
It is daunting to think about affording the cost of a multiple six figure college tuition expense. The key thing for any new dad to remember is that you can save for your child’s college little by little. The best thing to do is start as early as possible, and be consistent.
It may be a good idea to start gathering information about starting a 529 plan. Although you can’t open one until the baby arrives (you need a Social Security number), what you can and should do now is pick out the proper type of plan.
The SEC 529 plan page is a great place to start and once you have a handle on the basics you may want to start looking at the 529 plan offered by your state.
#5 Date Night!
And now for our final piece of advice about becoming a dad for the first time…
Now that there is going to be a little one around 24/7, it is going to become increasingly difficult to plan a date night. Just because you now have the cutest little angel ever created doesn’t mean you get to forget about your original angel that helped bring this one to existence. Now and when you officially become a new dad, be sure to be saving a few bucks every month so you can pay for a babysitter and spend some time with just the two of you.
Thanks for reading about preparing for fatherhood!
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Burnette, Margarette. 2022, October 11th. Nerdwallet. 6 Best High-Yield Online Savings Accounts of October 2022. https://www.nerdwallet.com/best/banking/high-yield-online-savings-accounts?trk=nw_gn_5.0
US Securities and Exchange Commission. An Introduction to 529 Plans. https://www.sec.gov/reportspubs/investor-publications/investorpubsintro529htm.html