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Financial Planning for Young Families

By: Chrissy Israel - Financial Planner

Building the path for financial success can be stressful, especially if your family is young. You may be getting married, buying a new home, or deciding to have children. All of these are wonderful and joyous changes, but they can cause questions and uncertainty. There are ways to navigate through these changes, without having to take on additional stress and truly enjoy the time you have while your family is young.  

Find a Financial Planner

  • Look for a fiduciary. A fiduciary is a person or organization that acts on behalf of their client. They put the client needs above their own, with a duty to preserve good faith and trust. They don’t just look at you like you’re a number or a way to make a dollar in their pocket.
  • Recommendations from family – most planners use a generational approach to their planning. If your family member uses someone they like, make sure you reach out to discuss what their process is and what that cost looks like to make sure it fits in your plan. If you don’t feel comfortable using the planner – don’t force a relationship. What matters is you are happy with what you are doing, and you trust the person you are working with to provide good comprehensive advice. It must work for you. 

Create or add to a Savings account 

  • Emergency Savings: 3-6 six months of expenses in savings – creating a plan with your planner can show you how to maintain this savings and how to contribute without hurting your day-to-day expenses.
  •  Utilizing a high yield savings – a good way to keep your account growing is a high yield savings – a good place to look is online FDIC insured banks such as Ally and Capital One as they have historically offered higher rates.
  •  Have a separate account for all your goals. Commonly known as "bucket accounts” or “the envelope method” but in an FDIC insured facility. You can name these accounts as the goal: home down payment, vacation saving, or holiday money. It’s a great way to prioritize what money needs to go where.
  •  Consider utilizing tax advantage college savings accounts (529) for your children. Consult your financial planner to find out what account is going to work best for you. 
  • Take advantage of your employer retirement benefits. If possible, contribute to your 401k to get the employer match when available. This is a great way to earn more retirement savings and set up your future for financial success. 

Review Loans

  •  Make sure you discuss your interest rate with your financial planner/loan originator. Sometimes, the rate isn’t the most important part of your loan, it’s the payment. If that is the case, be upfront with your planner or loan originator so they can optimize your month-to-month expenses.
  •  Before refinancing student loans, make sure to look at the benefits that you have. Federal loans have advantages such as options for income-based payments, forgiveness, and if you pass, the debt doesn’t go to your loved ones. Is that worth the refinance?   

Check Insurance Coverage

  •  Most companies offer insurance to their employees, in a wide range of options, and at a lower premium than purchasing privately. Look at the most you can select and see if your financial planner can help you optimize that benefit
  • What to look for when you do purchase insurance:
    •  Does it cover all my debt? 
    •  Will it cover expense deficit from lost income?
    •  How many years of income do you want replaced?
    •  How much is the premium and does that fit into your budget? Adjust as needed.
  • Term insurance is a great option for many people. Keep in mind that it is designed to be temporary – it comes with significant premium increases after the term ends if you want to keep the coverage. 

Get Estate in Order

  • Obtain a Power of Attorney with alternative appointees in case something happens to you and your spouse.
  • Set up Health Care Power of Attorney – This document allows you to name someone to make health care decisions for you if you're unable to. Look into one for each other and for each of your children in case there is a situation where you cannot be there to represent your child in a medical emergency.
    • Make sure you appointment alternative appointees. 
  •  Have a Living Will.
  • Have a Last Will and Testament.
    •  Appoint an executor of your estate.
    • Appoint a guardian and an alternate guardian for your children.
      •  Remember, these are the people that are going to take care of your children in your absence. Make sure they are healthy and able to care for them as you would. This is a hard decision. 
  • Think about starting a family trust.
    • For your children’s inheritance:
      •  This will give you the option of who will take care of your children’s finances and when they receive their inheritance. You can control as much of this as you want (Ex: receiving 25% of balance at age 25/receiving 5k for wedding).
    • Put your physical assets either in the name of the trust or title as Transfer on Death.
      •  This avoids probate and provides planning opportunities to minimize any estate taxes, therefore keeping as much as possible of the inheritance for your family. 
  •  Expense is a big part of this decision – do the most important documents first if you can. Check with family attorneys to see if there is a discounted price for generational planning. Check with your employer to see if they have a program to get estate documents at a discount. 
  • Review these documents every five years or as there are big changes in your financial picture (new home, birth of child, inheritance from family member).

The plans that are put into place now help ensure that your growing family will be protected in the event of an emergency.  Please contact our office if you have any questions or would like assistance in starting your plan.