“Happiness is only real when shared.” -Jon Krakauer, Into the Wild 

Family—in all of its shapes, sizes, jagged edges, smooth surfaces, and warm hearts: moves us, challenges us, and, above all, loves us. The gift of a family can never be underestimated, undeterred, or unfulfilled. For family brings out a new facet of ourselves and can change our outlook on life.  

If you are starting a new family or growing yours, Congratulations! One of the top priorities in my life is my family and finding new ways to deepen my love and commitment to them.  

There are many aspects of your life that change when you bring children into the mix, especially your finances. Your financial priorities will change when you have kids. I’d like to illustrate four ways your financial responsibilities will change and how to make that transition as smooth as possible.  

1. Increased Emergency Savings 

With emergency savings, you are planning for an unexpected (and unwelcomed) cost. Before you have kids, your monthly expenses will be lower, but it is important to be prepared for a cost increase as you start a family. With another person to take care of, you will need more food, clothing, and supplies like diapers, nursery, etc.  

When you add more monthly expenses it is important to balance that with the amount in your emergency savings. If something were to go wrong like an abrupt loss of a job or a costly home repair, you will need more money to cover the cost of your increased living expenses.  

It is also important to examine how many months of emergency savings you have. Before you had kids, you may have had anywhere from 3 to 6 months worth of savings. But when you start a family, it may be best to increase that from 6 to 9 months worth of living expenses. By creating this extra buffer, you are allowing yourself to secure finances for your growing family should something go seriously wrong.  

It may be tough to reallocate some of your savings to your emergency fund, but making it a priority will be helpful for you and your family in the long run.  

2. Examine Your Health Coverage 

What type of health care do you have now? When you start a family, it is important to see the type of coverage you have and if you are happy with it. You may want to increase your coverage in case something happens and you will need to add a dependent to your health plan.  

I advise new families to invest in a health savings account (HSA), if available. An HSA is a savings vehicle available with a high-deductible health plan that allows you to contribute to the fund with pre-tax dollars. The money in the HSA will grow tax-deferred, and, if used for medical purposes, distributions are tax-free as well. This is a wonderful savings tool for new families because accidents happen! There may be a time when a science project explodes in the kitchen, or your child gets hurt playing sports. Keep your health care as a top priority and examine ways that you can improve it. 

3. Prepare for The “Big E” (Education) 

Once you have a child, their educational costs will become a priority for you. With the cost of college tuition rising like an angry tide, the pressure for parents to save more and save early is high. Though education is incredibly important and something you should prioritize, it should not come before your emergency savings and your own retirement savings.  

Don’t sacrifice the health of your retirement savings for your child’s education fund. 

This is an important statement that parents really need to hear. Many parents believe they must be able to fully fund their child’s education and while that is noble and generous it should not come at the cost of your own well being. 

One great way to help you save gradually is to open a 529 account. You can contribute to it as you are able and the money will stay safe throughout the years. A 529 account is also a great way for grandparents to get involved in helping save for their grandchild’s future. Saving is a family endeavor. It will take time, flexibility, and diligence, but by the time your child is ready for school, you will be able to help them out.  

4. Start Estate Planning 

One of the top reasons people do not have a will is because they don’t think they have enough assets to leave anyone. I would like to dispel that thought from your mind. New parents especially need to think about their estate plan and the life they would want for their kids should something happen to them.  

Many people dread these conversations: lawyers, paperwork, death. No one likes talking about these things but it is imperative to the health of your legacy and stability for your family that you do so. Here are the top things you should discuss: 

• Establish a will 
• Create a power of attorney and/or medical directive 
• Set beneficiaries for your insurance, accounts, and other assets 

• Appoint guardians and/or trustees for your children 

Families are beautiful. But as with any masterpiece, the final product takes time, concentration, diligence, and a lot of love. Children will change many things about your life, from your day-to-day activities to your financial priorities. Understanding the important aspects of that shift will better prepare you for when it happens.  

I’d love to help you prioritize your financial goals and show you ways to maximize what you have to better serve your family. Give me a call!