For those who have started a family, it is a joyful and thrilling experience. My wife and I welcomed our first child last year and while it has been an amazing experience, a new arrival brings lots of change.
I have seen first-hand how a family requires you to adapt a new way of living. If you’re not well-prepared, the arrival of your first child can disrupt your financial plans, especially if, like many new parents, you’re unsure of where to start.
Here are some financial suggestions (from my own experience), for prospective parents to guide them through this transition and get ready.
Create a budget
Having a child will likely change your expenses and income, but you can continue to budget and plan accordingly. Review your current monthly budget. By doing so, you may discover ways to reduce costs and increase your savings.
Benefits and entitlements
Before your baby’s birth, determine what social welfare benefits you are eligible for, in addition to any employee benefits offered by your company.
If you are having a baby in Ireland, there are a range of supports for parents and children. Citizens Information has a wealth of information available online.
Consider adequate insurance coverage
Make sure you have adequate health and insurance coverage for you and your family, to protect your financial security in the event of an unexpected event.
Having a backup plan for unexpected situations, such as job loss, is crucial, especially during times of growth for your family. Building an emergency fund to cover 6-12 months of living expenses can provide peace of mind in case of unemployment.
Consider taking out income protection to safeguard your income should you be unable to work due to long-term illness or injury. When new parents are advised to purchase life insurance, it’s common to doubt its necessity. After all, we all hope to live for a long time.
However, if you are currently supporting a spouse, child, or other family member financially, the answer is clear: life insurance is crucial. For youthful and healthy individuals, term life insurance can be less expensive monthly than many popular streaming services, offering financial security for their loved ones in case of unexpected events.
Speaking to your financial adviser can help you select suitable coverage for you and your family.
Designate a guardian and create a Will for your children
Assign guardians to care of your children in the case of unexpected events affecting both parents. It’s important to review your nominated guardian(s) as your children age and circumstances change.
Write or revise your Will to outline how your assets will be managed and utilised to support your children’s future. Also, name an executor of your Will who will be responsible for managing your affairs, paying bills and expenses, and ensuring your property is distributed to the designated beneficiaries in your Will.
Maintain your financial goals
It’s important to remain focused on your financial plans. If necessary, lower your pension contributions but do not discontinue them all together. Continue to avail of employer matching contributions if you have a company pension scheme.
With the added costs of a new baby, it may be difficult to stick to your financial and investment plans. Many parents make the mistake of prioritising their children’s finances over their own retirement savings.
Focusing on your own retirement now will set you up for a secure future and minimise the likelihood that your child will have to provide for you in your later years.
Think about opening a Regular Savings Account and depositing a fixed amount each month. You can also utilise the €3,000 annual gift exemption to reduce the gift tax liability. Each parent can give up to €3,000 per child tax-free in a 12-month period.
For long-term saving for education/college, you may consider regular or lump sum investment funds. However, these funds come with some financial risk, so be sure to do thorough research, understand the level of risk you are willing to accept, and consult a financial adviser.
Seek advice from a professional financial adviser who can:
- Help you identify your future needs and help you increase your financial stability
- Save you both time and money by finding the most cost effective product on the market
- Explain the risks involved in specific financial products
- Suggest the most appropriate products to meet your needs
Here to help you navigate your way to financial security.
The Milestone Advisory team are qualified financial services consultants. We specialise in helping professionals in the construction sector and related industries.
Our team will work with you to review your finances, explaining your options in clear English. No jargon – just the facts.
For further information, contact Darragh Hogan in Milestone Advisory via email ([email protected]), or phone (01) 406 8020.
Milestone Advisory DAC t/a Milestone Advisory is regulated by the Central Bank of Ireland.