Why Do You Need a Financial Planner?
Your family is growing. Who's holding you accountable to your financial goals?
For the last two weeks, we've been discussing why you need a financial planner at the various stages of life that we all go through. Read more about financial planning for young professionals here, and about hiring a financial planner for newlyweds here. Today, I want to talk to those of you with new or growing families.
Last week we stressed to the newlyweds that financial goals aren't just about you anymore - you're now working as a team. Well, for you parents out there, it's really not about you anymore! We all know that person who has a child, and we think, "wow, you're a parent?!" Well, this time that person is you, and there are many financial steps and considerations that must be taken to make sure your family is comfortable and your needs are met.
With clients who come to us just before or after the birth of a child, the first thing on their mind is always starting a college fund. While saving for education is certainly important, it's not the first step we typically take when working with new parents.
The first thing we do is sit down with the couple and develop an in-depth budget. Kid-related expenses go beyond what new parents typically think of. Once the nursery is furnished and a day care is picked out, there are multiple car seats to buy, doctor bills, shoes, swim lessons - it's trial by fire really, as it's very difficult to foresee every expense that comes up around that new baby.
Once a realistic budget is set, we then talk about accountability - again, it's not about you anymore. Splurging on a big meal out and paying it off with the next paycheck isn't an option when there are diapers and baby food to buy. And we certainly don't want to see clients make big mistakes like taking money out of retirement accounts or going into credit card debt.
Third, we like to talk to the couple about this new stage of their marriage. Communication is more important than ever when raising a child. Many times, I see couples disagree right there in the conference room about how to raise a child, and this can lead to stress within the relationship. How spoiled will that child be? Will Junior wear designer duds or hand-me-downs? How will you handle allowance and chores as the kids get older? We can help mediate when parents disagree about kids and finances.
Which leads me to the next point we cover with new parents: teaching your children about money. Kids observe their parents' behavior, so be sure to set a positive example for them to follow. But beyond that, what values about money do you want to instill in your kids? Think about your first money memories, and how your parents taught you about money. What did they do well? What would you do differently? And even if your kids are older, it's never too late to start talking to them about money and teaching solid financial habits. There are many methods you can use to teach children about money - it all depends on their personality.
Now, let's talk about college planning. Parents need to decide how they'll approach this daunting task. Some client families want to foot the entire bill, some want to pay for some while encouraging their children to contribute, and others believe the children should be solely responsible and work their way through school. Whatever approach you and your spouse take, discuss that with each other and your financial team to make sure you're prepared. And we always encourage couples to keep up with their own retirement savings while saving for college. College only lasts a few years, but your own retirement and the legacy you leave for your children and grandchildren will likely last much longer.
Whether your first child is on the way or your last child is about to leave the nest, we're happy to sit down with you and review your financial situation. Call us today - we're always here to help.