Financial Strategies for New Parents: How to Build a Secure Future

Financial strategies for new parents; a couple with newborn baby on a bed.

Welcoming a new child into your family is one of life’s most thrilling milestones, but it often changes your responsibilities and financial priorities. Planning for your expanding family’s future should be a top priority if you are a new or relatively new parent. 

As Buffalo Grove wealth advisors, we use a holistic financial planning approach for our clients. This allows us to look at all aspects of your financial situation so you are better prepared to handle life’s twists and turns, especially now that you have a growing family.

Creating a comprehensive financial plan is the first step in building a strong financial foundation for your family. This plan should include budget adjustments to accommodate the costs of raising a child such as healthcare, childcare, education, and everyday living expenses. 

At SGL Financial, we construct your financial plan to adapt to your changing financial situation easily, ensuring you are prepared for all of life’s predictable stages.

In this blog post, we’ll look at ways you can begin building a solid financial foundation for today and a future that may include 30 years of retirement for one or both spouses. 

Build an Emergency Fund

One of the cornerstones of financial security, especially for new parents, is having an emergency fund in cash (money market funds, T-bills, CDs). This fund should cover at least three to six months of your living expenses. 

There are several reasons why it’s important to your family’s financial well-being to have an emergency cash fund readily available.

  • Life is unpredictable, and unexpected expenses can arise at any time. Whether it’s a medical emergency, car repairs, or a sudden job loss, having an emergency fund ensures that these situations don’t derail your future financial security.
  • An emergency fund provides a financial safety net, giving you more confidence to cover essential expenses without relying on credit cards or loans, which can be an expensive debt. 
  • Without an emergency fund, you may dip into other savings accounts that were intended for long-term goals like buying a home, your retirement, or a child’s education. Untimely withdrawals can significantly delay or derail these plans.
  • Financial stress can affect mental and physical health. An emergency fund reduces worry about handling sudden financial challenges, allowing you to focus more on your family and less on day-to-day financial concerns.
  • Maintaining an emergency fund sets a good example for your children about saving and being prepared for the unexpected. This can instill invaluable financial habits they can carry into adulthood.

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Protect Your Family with Adequate Insurance

One thing in life is certain… It can be unpredictable! Because of this, having sufficient life, disability, and health insurance is critical, especially as your family obligations continue to grow. 

Life insurance can provide financial security to your family in the event of your untimely death, ensuring they can maintain their standard of living and cover debts and future expenses like education. 

Health insurance should also be reviewed to ensure it covers your family member’s medical needs. 

Consider speaking with a Buffalo Grove CFP® professional at SGL Financial to determine the appropriate coverage levels and the best insurers.

Investing in Your Child’s Education

Given today’s average cost for a four-year college, the sooner you can start saving for that event, the better off you and your offspring will be. 

  • In 2023-2024, an in-state student’s average annual tuition and related fees cost approximately $11,260. When you add room and board, that number increases to $28,840 per year, totaling about $115,360 over four years.
  • The average cost for tuition for an out-of-state student in 2023-2024 is around $29,150. With room and board, the total cost of attendance rises to roughly $46,730 per year, totaling about $186,920 over four years.

Options like 529 College Savings Plans offer tax advantages and can be a practical way to save for college and other educational expenses. Teaching your children about saving and investing can also prepare them for a financially stable life.

Estate Planning is Essential

Estate planning is not just for older, wealthier people; it’s crucial for anyone who wants to secure their family’s financial future. 

Your estate plan should include creating a will, setting up trusts, and making healthcare directives. 

An estate plan helps you ensure that your assets are distributed according to your wishes and that your children are cared for by your chosen guardians. 

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Retirement Planning Shouldn’t Be Neglected

You may think, “I don’t need to start planning for retirement yet.” However, it’s not as far away as you may think.

If you work for an employer offering a retirement plan, such as a 401(k), set up automated contributions monthly. Remember that your contributions in traditional (non-Roth accounts) are pre-tax, meaning you won’t pay taxes until you withdraw funds much later in life. Also, remember that your contributions to your 401(k) can help lower your taxable income.

If there is an employer contribution match, this is free money that you can benefit from. SGL Financial can help align your retirement goals with your evolving financial landscape.

Watch: “How to put graduation money to work for you.”

Regular Review and Adjustment

Your financial plan should not sit in a binder on a shelf collecting dust. It should evolve as your family grows and your needs change over time. 

Regular reviews with your financial advisor ensure that your financial strategies align with your long-term goals. 

About SGL Financial

Navigating the financial landscape as a new parent can be overwhelming, but SGL Financial is here to help provide personalized guidance tailored to your family’s unique needs. 

From budgeting and cash flow management to establishing a robust emergency fund, managing debt, and planning for your future education and retirement requirements, our team of financial planning professionals is equipped to support you every step of the way. 

Connect with us today and take the first step towards a confident financial journey.