Q: What financial actions can new parents take while expecting a child?
A: One place to start is updating your budget to prepare for new expenses and ditching unnecessary expenses to accommodate the increased spending over the next few years. Keep in mind the lost income throughout this transition, especially if one parent will stay at home with the child. Common baby-related expenses you should account for include gear (a car seat and a stroller), furniture, childcare, and feeding. Once you understand your new expenses, start building an appropriate cushion to relieve financial stress as you transition from we to three.
Q: What are the most common financial mistakes new parents make?
A: Forgetting about the additional steps needed to protect your expanding family under any circumstances. From a financial perspective, the joy of being a parent comes with the added responsibility of protecting your child no matter what. The amount you should set aside for emergencies will vary by family, but you could start with three to six months’ worth of your (updated) expenses. Many new parents overlook the need for life insurance coverage and the amount of coverage that will be appropriate will grow with the size of your family. Parents should also consider a durable power of attorney, living will, healthcare power of attorney, and will with guardianship provisions. The important thing is that you take steps to protect yourself and your family.
Q:How can parents balance the costs of raising a family with saving for the future?
A: There is no simple or easy answer to this question, but the key is planning and prioritizing appropriately. It is critical to make sure you build your budget with enough room to secure your financial future, since time is your best friend for saving for the long term. We suggest a simple framework—allocate 20% of your take-home towards your goals and spend the rest.
Have more questions? Schedule a complimentary appointment with a SoFi financial planner at sofi.com/sofinancial.
Brian Walsh, CFP®
Brian leads the financial planning team at SoFi and is a CERTIFIED FINANCIAL PLANNER™ professional. As a self-proclaimed financial planning nerd, he leverages research, member feedback, and past experience to deliver advice that is both meaningful and practical. As a father of two children under two, he has firsthand experience balancing the joys and challenges of parenthood.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The opinions and analysis expressed here are those of Brian Walsh as of September 19, 2019, and are for informational purposes only. Views may change as market, economic, and other conditions change. This information isn’t financial advice. Investment decisions should always be based on specific financial needs, goals, and risk appetite.