Father’s Day Financial Advice for New Dads
From budgeting for an emergency fund, healthcare, insurance policies and college, new dads need a financial roadmap when the little one arrives.
Every year there’s a community of new dads ready to welcome their first child and celebrate their first Fathers’ Day.
Before the long-anticipated new baby has arrived, it’s critical to assess and reassess the family’s financial health, goals and plan for all that the future holds for the brood.
According to a recent article in TheStreet.com, the average total for raising a child from birth to age 17 is $233,610 in a married, two-parent, middle–income family. This information comes from a U.S. Department of Agriculture (USDA) report from 2017, using information from 2011-15 and figures in 2015 dollars.
The article states that “the report breaks up costs into three income ranges, with $233,610 being the average for those qualifying families who make between $59,200 to $107,400. Those in the lower income range, making under $59,200, required an average of $174,690 to raise a child. Those in the highest income range, making over $107,400, spent $372,210 on raising a child.”
It may not have dawned yet on some first-time dads just what it takes—financially—to raise a child today:
- Is there a plan for healthcare and health insurance?
- Is there an emergency fund for unexpected needs—whether medical, home amenities, or baby supplies, like formula?
- Is there disability insurance to support the family in the event of an injury?
- Is there a plan for college tuition?
Phillip Hansen, a financial planner with CUNA Mutual—and father of four—has great advice for new fathers about planning for the family. He says the first thing he tells clients is to have at least 3 to 6 months of salary saved—and banked—to start an emergency fund. (This advice applies to everyone, not just those with children.)
Hansen, who is father to five-year-old twins, a three-year-old, and a one-year-old, says that he planned for his own family and did the standard things to build sufficient savings to buffer for unexpected experiences, including making sure that health insurance for the family was top-notch.
Unexpected medical expenses hit
Still, the Hansen family couldn’t have predicted their youngest son needing brain surgery at one-day-old, followed by a month-long stay in a neonatal intensive care unit, resulting in $600,000 in medical bills. Because of the excellent health insurance and a solid ‘rainy day fund’ Hansen had established, the family paid a fraction of that amount and the money was there to support the family at a very emotional time.
“If you had to worry about how to cope with the health of your child—and how to pay for it—that would be just unbelievably stressful and excruciating,” Hansen said. “Compounding medical bills piling up is the number-one cause of bankruptcy, so if you are not well-insured it can lead to financial ruin. I advise all of my clients to ensure a solid savings account and to invest in the best medical insurance they can afford.”
Hansen, who grew up on a modest rural farm in Utah, is also a huge proponent of helping new parents understand that they don’t have to break the bank for the kids. He advises them to live within their means; budget, budget, budget, help teach them financial discipline, responsibility, and the value of an hour of work. He says that will help them most in planning for—and thriving in—the real world.
“My kids are still very young but I’ve already started helping my five-year-olds understand the value of an hour of work—they cannot really understand the concept of a dollar but if we talk about how many hours of chores it would take to buy a certain toy, they get it,” he said. “I help my clients understand this notion as well—and whether they can really afford to buy that new house or if they should hunker down for a few more years and save up for the dream home with a little more planning.”
Other financial tips for new fathers:
- Automate savings and debt payments to stay on course
- Take advantage of tax breaks
- Begin planning for child care expenses
- Rethink a life insurance policy—and put a will together
- Start saving for college
“Fatherhood requires an amazing amount of sacrifice—but it’s all worth it,” Hansen said. “These kids look at us like we know what we’re doing, which is very sobering. One of the best things we can do for them is prepare them for the real world—our children are capable of much more than we give them credit for but are rarely prepared enough to face the financial challenges ahead.”