Financial advice for new fathersBy Jason Alderman
People often say mothers have the hardest job in the world – and I wouldn't dispute that. But being a father might be the second hardest job in the world. And becoming a dad for the first time is a challenge for all men.
Putting aside the physical and emotional rigors of fatherhood, the financial implications of having a child are staggering.
According to the USDA, the average cost for a middle-income family to raise a child until age 18 is over $200,000 – and that doesn't even include college. Small wonder, then, that nearly 40 percent of Americans surveyed by Visa Inc. said they weren't prepared financially for the birth of their first child.
As one dad to another, let me share a few financial planning strategies that can help map out a strong financial future for your family:
Get insured. Although young, single adults often go underinsured, if your family depends on your income, you shouldn't be unprepared for life's unexpected events. Buy adequate coverage for:
- Health insurance. If you don't think kids are expensive, start adding up the costs for prenatal exams, delivery, immunizations, check-ups, broken arms, medications, dentist appointments, braces – the list goes on. When comparing medical plans, focus on issues like monthly premium, copayment, deductible and prescription amounts, in- and out-of-network charges, and coverage limits and exclusions.
- Homeowner/renter's insurance. Don't allow theft, fire, faulty plumbing or other catastrophes to leave your family without possessions or a place to live. Consider choosing a higher deductible to lower your premium, and opt for "replacement cost" coverage, which will replace items in today's dollars.
- Life insurance. Depending on your family's size and ages, you'll probably want coverage worth at least five to 10 times your annual pay; more, if you want to cover college costs. And don't forget to insure your spouse so you'll be protected as well.
- Disability insurance. Nearly a third of us will suffer serious disabilities between ages 35 and 65. Yet many folks forego long-term disability insurance, potentially leaving them without an income after a serious accident or illness. To learn more about the financial implications of disability and other unexpected life events, visit Practical Money Skills for Life, Visa's free personal financial management site (www.practicalmoneyskills.com/unexpected).
Start saving now. It's ironic: When you're young and can least afford it, that's when you can make the most lasting impact on your financial future. The earlier you start saving and "compounding" or reinvesting the interest earned, the faster your savings will grow. That's true whether you're saving to buy a house, pay for retirement or send your kids to college.
One tip: If your employer offers 401(k) matching contributions, contribute at least enough to take full advantage of the match: A 50 percent match is the same as earning 50 percent interest on savings.
And finally, spend responsibly. If you buy things you don't really need or can't afford, you'll just end up having to work longer hours to pay for them. That's unrecoverable time you could have spent watching your kids grow.
This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.<< Back to Practical Money Matters
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