Financial Planning for Your Growing Family

Photo of three shoes sitting next to each, one children's pair in middle of three adult pairs.

A few months ago, my husband and I received big news: we are pregnant with our first child, and our new bundle of joy is set to arrive this September.

As we prepare to embark on this new journey, one area that has remained top of mind has been our financial plan—I want to make sure this is something that does not fall to the wayside as we transition to a family of three. It can be easy live on auto pilot or simply react to change as it occurs, but it is important to reexamine your financial situation with each new life change. As a family, it has been a priority to allow our financial plan to grow as our family grows. To do this, we’ve considered the following topics, and we encourage any individual or family who is currently experiencing (or expects to experience) a major life change to consider them alongside us:

Photo of HFG Trust wealth planner Megan Farrow with husband on beach, Megan grabs her stomach indicating pregnancy.

A Growing Budget and a New Class of Expenses

Food, diapers, daycare, and clothing are just a few of the new expenditures you can expect in your monthly budget once you have your new addition. Now is a great opportunity to examine your current budget and adjust as needed. It is common practice to build and maintain an emergency fund equal to at least three months’ worth of expenses. With a growing family, however, you may want to consider growing your emergency fund to six months’ worth of expenses to allow yourself the extra cushion.

Refinance Your Debt

In today’s low-interest rate market, now is a great time to take advantage and consider refinancing debt to a lower rate. Not only will you be lowering your monthly bill, you’ll also reduce the amount you pay toward the loan over your lifetime.

Saving For College

It’s never too early to start saving for college, and a 529 account could be an investment tool to consider. A 529 plan is an investment account that can be used to cover educational expenses from kindergarten through graduate school, and distributions are tax free when used for qualified educational expenses.

Do Not Forget About Retirement

Retirement can feel so far in the future that it can be easy to sacrifice your retirement savings in favor of more immediate financial concerns. However, the sooner you begin paying yourself first the better prepared you will be to achieve financial success in retirement. Your advisor can work with you to evaluate a financial plan and determine if you are on the right track, as well as identify areas that could be adjusted to fit your lifestyle.

Check in on Your Estate Plan

Do you know what would happen to your assets if you were to suddenly pass? An estate plan will allow you to create a plan for your legacy that matches your vision; and more importantly, it will allow you to select a guardian for your new child.

Review Your Insurance Needs

Life insurance can be used to provide your loved one’s income to cover daily living expenses, pay down debt, or be set aside to help pay for college. As your life changes and your expenses and income fluctuate, it’s important to make sure your life insurance proceeds cover the needs of your family. Take the opportunity to reexamine your coverage and increase your benefits as appropriate.

Before the sleepless nights hit, take the time to evaluate your situation and set up new goals for your growing family. If you’re not sure where to start, ask your advisor to walk you through the steps and evaluate if you are on track.

Megan Farrow

Wealth Planner, HFG Trust