5 Basic Financial Decisions All Parents Must Make

toddler boy with toy car and autumn leaves, financial decisions parents must make

There’s is a lot to consider when it comes to financial planning for parents, but these five basic financial decisions will go a long way to financial success.

Whether you’re a new parent or you can’t remember what it was like to change diapers, there are five decisions all parents must make. Well, there are more than five—what is for dinner tonight? But when it comes to financial planning for parents, there are five basic financial decisions every parent should make. After all, kids are many wonderful things, but money-makers they are not! You need to do what is necessary to make good financial choices so you can give your kids the lives you want for them—and maybe not have to work for the rest of your lives to do it!

Develop a Plan to Save Money

First and foremost, you should develop a systematic savings plan. Most of us live our lives, pay our bills, and maybe when our accounts have a little more money than we are used to (a rare and good problem to have!), we transfer some to savings. But when money is in the checking account, it gets spent. If that sounds familiar, you’re not alone—almost everyone does that! The single best thing you can do when it comes to making good financial choices isn’t to find some great investment, but rather to find a way to save more. So, if your money gets spent when it’s in your checking account and saving more is essential, what should you do?

Create a plan to save money that is systematic. There are two basic ways to do this. First, you can set up an automated savings plan where a certain amount is transferred automatically to a separate account every paycheck or every month. That is a smart approach, but it has drawbacks. There are going to be times during the year when extra money is in your account and you could have saved more. Maybe you get paid every two weeks, which means there are two months a year when you get an extra paycheck. Maybe you earn enough that your Social Security contribution (this is automatically taken from your paycheck) maxes out and your check gets 6.2% bigger. Setting up auto transfers to savings is great, but it would not capture all those extra dollars.

The second way of saving is even better. Rather than being conscious of how much you save and unconsciously spending the rest, what if you flip the order of that? What if you are conscious about what you spend, and the savings is unconscious? For that, we set clients up with an account where their paychecks are direct deposited and monthly spending money is sent to their checking account. That way, all those extra dollars get saved automatically! Whichever way you decide to build your savings, setting up a systematic savings plan is essential to financial success.

Consider Individual Disability and Life Insurance Policies

The second financial decision you should make will protect your income. Of all the things that could mess up someone’s financial plans, I can’t think of anything that would be more devastating than someone losing their income for a long period of time. And while you may have some sort of “Long Term Disability Insurance” through your benefits at work, there is usually a pretty big gap between what your paid when working and what the group disability would provide. That means you need to make sure your income is protected and buying an individual disability insurance policy and life insurance are easy solutions. Of course, this isn’t super sexy or fun to talk about, but it is essential if you want to provide for your kids—especially if something unexpected happens.

Choose a Guardian for Your Kids

Speaking of things that aren’t fun to think about, who would be the Guardian for your kids if something were to happen to you? Who would make sure the bills get paid? Who would make health care decisions for you if you become incapacitated? Whatever your answers are, you need to write it down and create a Will and perhaps Trusts. More than anything, you want to be sure your kids are safe, your assets go to who you want them to, and that you don’t leave a huge mess behind. That can only happen if you create the right legal documents.

Consider a College Savings Plan

What about college, you might ask. You probably don’t know this yet, but [looks around to make sure no one is listening] college is expensive! Like anything else you save for, the sooner you start, the better your chances for success. There are many places to save for college—including a 529 college savings plan. I would say that no one vehicle should be the only place you save money for college, but if college is something you want for your children, a specific plan to save for college for it is essential.

Build an Emergency Fund

Finally, and perhaps most importantly, you need to find a way to have sums of money accessible at all times, like an emergency fund. And if you have short-term debt (credit cards, auto or student loans, etc.), you need to find a way to get out of it, while still building up a liquid source of money. Debt is not just a number on a page; it is emotionally charged, so there is a temptation to try to put all of your extra money toward eliminating it. But you need to build a liquid source of money (an emergency fund) at the same time. If you don’t, then once you are out of debt and something goes wrong (such as losing a job, fixing your car, or needing expensive medical care), you’ll just fall right back into debt again. Having that available source of money isn’t just about protecting you against bad things, you need it so you can take advantage of unique opportunities along the way.

There is a lot that goes into being successful financially—especially once kids are added to the mix. But if you start with these five basic financial decisions, you’ll dramatically increase your odds of success, which means you increase the odds that your kids will be successful. And what’s more important than that?

Bobby Angel is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 120 Broadway, 37th Floor New York, NY 10271. phone: 212.701.7900. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Strategies for Wealth is not an affiliate or subsidiary of PAS or Guardian. CA Insurance License #0G64811. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The Guardian Network® is a network of preferred providers authorized to offer products of The Guardian Life Insurance Company of America (Guardian), New York, NY and its subsidiaries. Strategies for Wealth is an independent agency and not an affiliate or subsidiary of Guardian.2020-109480 Exp. 9/22


Bobby Angel is a Managing Director in the Manhattan office of Strategies for Wealth. He works with clients on everything from savings rate to insurance to legal documents and investments. His goal is to help clients create a financial plan that will work under almost any circumstances. His favorite aspect of his career is working with families to help them figure out what they really want and how to get there. Often, Bobby finds that couples have not discussed their financial goals with each other. Helping navigate that conversation and creating a plan in which everyone feels fully confident is truly rewarding to him. When not working with clients, Bobby is likely in Park Slope, Brooklyn with his wife and two children. He enjoys coaching his son’s football and baseball teams and debating with his daughter before ultimately conceding defeat. To learn more, feel free to contact Bobby at 212-701-7973 or [email protected]. For additional information, visit strategiesforwealth.com/team/bobby-angel.

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