How Being A Dad Changes Your Financial Planning
It’s Father’s Day once again. This occasion may seem underrated when compared to Mother’s Day, but the contribution of a father should be equally celebrated. The responsibility that a man carries as a father is mind-boggling!
Who do you think goes through sleepless nights trying to balance the household’s finances every month?
To save fathers from sleepless nights, we have four key financial moves that will bring any fathers (new or old) the peace of mind they need!
1. Getting (adequate) insurance
Being a new dad means that you’re bringing into this world a little human that will depend on you 100% — for everything. What would they do if you suddenly stopped being around?
It’s a morbid thought but one that needs to be addressed the moment your child is born.
It’s important that you review your life insurance policy by increasing your sum insured. That way if something happens to you, your family’s future financial needs will be adequately covered.
You should also get an insurance policy for your unborn child and your pregnant wife (from 18 weeks onwards) and then transfer it to an insurance or savings plan policy for your newborn baby.
2. Update your beneficiaries
Parents often get drowned in the motions of welcoming a newborn baby (surviving on a few hours of sleep every night can do that to you), that they overlook this important step of parenthood.
This should be done periodically and not just for new dads. If you have a second or third baby, you should also update accordingly.
This doesn’t just apply to your private insurance policies (from life insurance to mortgage life insurance) but also to your PhilHealth, SSS account, and company insurance policy (if any).
3. Saving for your child’s education fund
Starting your child’s education fund the moment he or she is born (or even before) may seem like overkill, but once you find out how much it’ll cost you to send your child to college when he or she reaches 18 years old, you will understand why.
Did you know that on average a child’s education, from elementary school up to college (for private schools) can cost you the following figures annually?
Elementary: ₱ 70,000 – ₱ 200,000
High School: ₱ 100,000 – ₱ 250,000
College: ₱ 110,000+
And these don’t include miscellaneous expenses like their school supplies, food expenses, equipment, and moving expenses.
The figures above are the average figures you’d get if you enroll your child today. 10 years from now, the costs will be totally different, for good measure, it is better to expect at least a 10% increase in tuition fees, every year.
If you think simply saving your money in the bank is enough, keep in mind that your savings won’t account for inflation.
This brings us to the next financial move every father should consider…
4. Investment moves
If you want to save more, the most realistic tip we could tell you is to earn more. The challenge now is, how can you increase your income? Well, there are a handful of options to do that – you can get a second job, ask for a salary increase, run a business. On the other hand, you can also make your money work for you through investments.
Economic conditions aside, investing is better now than ever. Filipinos now have access to various platforms, resources, and tools that will make investing much easier. You no longer need to be a financial expert to start, with low-risk investments such as mutual funds, unit investment trust funds (UITFs), blue-chip stocks, variable universal life insurance (VUL), and index funds.
So why should you invest in the first place? Why not just save your money?
Unlike saving money in the bank, investing will bring you returns high enough to beat inflation. How? For starters, the historical annual growth of the Philippine Stock Exchange Composite Index (PSEi) is around 10-15% in the last 15 years.
While we can’t deny the risk that comes with investing in the stock market comes, but historical data has consistently shown how it can easily recoup the losses it incurs during its lows from the PSEi’s highs in the long run.
If you invest your money for 10 years or more rather than keeping it stagnant in your savings, you’ll definitely earn so much more.
As a new father, it is understandable that your risk tolerance would be much lower than before – you don’t have the luxury of losing money in your investment now, so proceed with caution.
Since this type of investment is long term, it is important for fathers to review their investment portfolios to reflect their risk tolerance. With an additional financial goal (saving for your child’s education), your portfolio will eventually get an overhaul. Don’t worry, as your child becomes older, you will be able to adjust your portfolio to riskier investments as you see fit.
Being a father for the first time doesn’t have to be overwhelming if you put these four financial moves in place. You and your loved ones will be better off for it. And the best part? You get to be celebrated every year as the best father in the world by your kids.
Happy Father’s Day!