How Being A Dad Changes Your Financial Planning
Father’s Day is this weekend! This occasion may seem underrated compared to Mother’s Day, but a father’s contribution should also be celebrated. The responsibility that a man bears as a father is mind-boggling! Who do you think spends the night trying to balance household finances each month?
To save fathers from sleepless nights, we have four key financial measures that will give fathers (new or old) the peace of mind they need!
1. Obtain (adequate) insurance
Being a new dad means you bring a little human into this world who will depend on you 100% – for everything. What would they do if you suddenly stopped being there?
It is a morbid thought but it must be addressed at the time of the birth of your child.
It is important that you revise your life insurance policy by increasing your face amount. That way, if something happens to you, your family’s future financial needs will be adequately covered.
You must also take out an insurance policy for your unborn child and your pregnant woman (from 18 weeks), then transfer it to an insurance policy or savings plan for your newborn.
2. Update your beneficiaries
Parents often drown in the movements of welcoming a newborn baby (surviving a few hours of sleep each night can do that), that they forget this important stage of parenthood.
This should be done periodically and not just for new fathers. If you have a second or third baby, you should also update accordingly.
This applies not only to your private insurance policies (from life insurance to mortgage life insurance), but also to your employee pension account and your business insurance policy ( if applicable).
3. Save for your child’s education fund
Starting to finance your child’s education when he is born (or even before) may seem excessive, but once you know how much it will cost to send your child to college when he turns 18 , you will understand why.
Did you know that on average, Malaysian parents spend an average of RM 107,920 on their child’s education, from primary school to undergraduate studies?
The survey carried out by a regional banking group also revealed that many parents are making or have made financial sacrifices to financially support their child’s education, 50% reducing their leisure expenses and 32% working more hours, contributing less to their savings or investments, and took a job or a second job.
This brings us to the next financial decision every father should consider …
4. Review your investment portfolio
Investing is no longer just an option for fathers. Let’s face it, not everyone can afford to save RM 42,043.20 a year! The only way to protect your money while you save is to put it in an investment that will bring you returns high enough to beat inflation.
On the conservative side, if you choose an investment with an average return of 7% each year, you will still have to save RM 21,812.15 per year, or RM 1,817.70 per month. Still a lot, but it’s almost 50% less than the original amount!
Besides your sleep pattern and your changing social life with a baby, you should also anticipate a big change in your investment portfolio. As a new father, it’s understandable that your risk tolerance is much lower than before – you don’t have the luxury of losing money on your investment now.
It is important that fathers examine their investment portfolio to take it into account. With an additional financial objective (saving for your child’s education), your portfolio is being redesigned. Don’t worry, as your child grows, you can adjust your portfolio to riskier investments as you see fit.
Being a father for the first time doesn’t have to be overwhelming if you put these four financial measures in place. You and your loved ones will be better off. And the best part? You get to be celebrated every year as the best father in the world by your children.
Happy Father’s Day!
This article was first published in June 2014 and has been updated for freshness, accuracy and completeness.
Our sincere thanks to