7 Financial Tips for New Parents

by | Nov 25, 2022 | Life Insurance & Protection, Back to Blog

7 Financial Tips for New Parents in Letterkenny

If you’re about to start a family, congrats! It’s a wonderful and exciting time. That said, it does mean adjusting to a whole new lifestyle. So, doing some financial planning now can help you stay in control of your money during this transition. If you don’t have a financial plan for bringing up baby— and many first-time parents don’t — it’s easy to let your finances get away from you. But don’t worry, we’re here to help. Check out our top financial tips for soon-to-be parents below.

7 Financial Tips for New Parents | Advice First Financial

1) Appoint a Guardian for your children and make a Will

Choosing a guardian for your children is an important decision, and one that you should update as your circumstances change over time. You can include this designation in your will so that there is no confusion about who should care for them if something happens to you and your partner.

Update your Will or create one if you haven’t already. This will let you dictate how you want your assets to be distributed and used to help your children in the future. Furthermore, assign someone as the executor of your Will. This person would then be tasked with taking care of loose ends, paying bills and expenses, and ensuring that everything is transferred over to those named in the Will.

2) Put cover in place

It’s never too soon to start planning for your baby’s future by getting life insurance, adding them to your health insurance, and/or taking out income protection.

It’s important to think about what your family will need in the future to help reduce big disruptions to their lifestyle if you die or become too ill to work. People often underestimate the importance of insuring a stay-at-home spouse or lower income earner. Childcare and other daily responsibilities can change drastically when a parent dies, causing extreme financial and emotional stress on the surviving spouse.

If you die and have a Life Insurance policy in place, your loved ones will receive a tax-free sum of money that can help cover expenses like bills and outstanding loans. Unless you have a Section 72 Life Insurance Policy, life insurance benefits may be subject to inheritance tax as part of the total value of assets received by beneficiaries. To learn more about what options are available to you, consult with a Financial Planner.

3) Now’s the time to start saving for their education

The earlier you start saving for your kid’s college funds, the sooner they (and you) can relax. Try setting up a Regular Saver Account and putting away a set amount each month. You could start with the children’s allowance

You can also use the €3,000 small Gift allowance to reduce or avoid the Gift Tax fee. Each parent is allowed to gift up to €3,000 to each child tax-free within any 12-month period.

If you’re looking to invest for the future, such as saving for college fees, then some good options to consider are stock markets and investment funds. However, it’s important to remember that there is always some financial risk associated with these sorts of investments, so be sure to do your research ahead of time and know exactly how much risk you’re prepared to take on. It can also be helpful to talk to a professional Financial Planner before making any decisions.

4) Draw up a monthly budget plan

With a new baby comes a lot of changes–one of which will be your finances. To adjust, take a look at what your monthly budget looks like currently. Make note of all income, expenditure and savings each month. By doing this you may be able to find areas where you can save money instead of spending it.

If you’re new to budgeting, a good rule of thumb for effective budgeting and financial planning is 50/20/30:

Out of your income, 50% should go towards essentials like your mortgage, bills, food, and so on. Then 20% should be set aside for savings and pension contributions (including any debt payments), pension contributions come with valuable tax relief benefits. Lastly, 30% is for you to spend however you want on things that make you happy or improve your life in some way.

When making a list and buying for a baby, keep in mind that some of the more expensive items can be sourced secondhand or by asking friends and family to pool their money.

Use birthdays and Christmas as an opportunity to ask friends and family for gift cards to restaurants, theatres, or cinemas. In doing so, you’ll have plenty of opportunities to spend time with your partner worry-free once the baby arrives.

Obviously, family and friends are also required for babysitting duties as well.

5) Boost your emergency savings

Each month, put away a bit of money for unexpected expenses. If you need to take significant time off work for parental leave, this fund will come in handy. Also consider taking out income protection in case you can’t work due to illness or injury.

Your emergency fund should have at three to six months’ worth of expenses, depending on your lifestyle, monthly costs, income and dependents. The rule of thumb is to put away €100 per month or 10% from each pay cheque if possible until you reach your goal. Once achieved, you can stop contributing but review the fund regularly in case there are increases in living costs or other financial obligation changes.

6) Talk to each other regularly about your finances

Money stress can increase when you have children, so take the steps to discuss your financial goals with your partner and make decisions together. Financial problems is the number 1 cause of relationship breakdown and arguments, so it’s better to be on the same page from the start.

Some helpful things to consider when talking about your finances are:

  • What are our financial goals?
  • Do we want to save for a rainy day, a holiday, a new car, a deposit on a house, our child’s future?
  • What about our own retirement?

Although you want to provide the best for your child, it’s just as important that you don’t lose sight of your financial goals. With a baby comes a myriad of new expenses, and it can be easy to let saving for retirement fall by the wayside. Don’t make the mistake many parents do in putting their children’s needs above their own when it comes to money.

The best way to take care of your children is by taking care of yourself. After all, you can’t pour from an empty cup. Not only that, but it’s important to set a good example for your kids about financial responsibility and management if you want them to grow up successfully navigate adulthood themselves one day. Fortunately, there are many ways to do this! You should start by finding out what social welfare and tax benefits you may be entitled to in advance of baby’s birth – as well as any employee benefits your company offers. This will help relieve some pressure and give you a solid foundation on which to build other Savings strategies for the future.

7) Ask an expert

Speak with a qualified and experienced financial adviser, who can:

  • Help you understand your needs, plan ahead and become more financially secure.
  • Save you money and time by shopping around on your behalf.
  • Help you understand the risks involved in certain financial products.
  • Recommend the most suitable products for your needs.
  • Regularly review with you how your financial circumstances and goals change (as well as the market).

If you have questions or need advice on Financial Tips for New Parents, call 074 9103938 or email now.

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