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When we become parents, everything changes. There’s undeniably pressure, but there’s also intense joy in the realization that now, you have a valid reason to get your life in order at last. And, for many fathers, the first step towards doing that is a financial one.
After all, the average cost of raising a child to the age of 17 is currently $233,610, so ensuring you have plenty in the bank is more important now than ever. But, that’s not all. You’ll also likely want to do everything that you can to make sure your child is comfortable no matter what. And, that’s what we’re going to focus on here.
Admittedly, the future (specifically a future without you in it) can be the last thing that you want to consider during those blissful newborn days. But, you really can’t be too prepared in this sense and, as soon as your child is registered and out there in the world, you’re going to want to protect their financial future in the following ways. Here's a few lessons on fatherhood and finances.
Firstly, you’re going to want to update your will and trust with your new addition in mind. The slightly reassuring news here is that probate law generally dictates a child born after a will is written still stands to inherit what’s theirs by right, but it’s always best for you to expressly alter your will or trust assets with your child in mind. Otherwise, they may fall foul to higher rates of inheritance tax and largely unbeatable contests from third parties. Not to mention that you simply can’t rest easy that your child will get everything you intend if you don’t make your wishes known. In cases where there are other benefactors, in particular, default laws will typically favor an equal split, without taking any spoken or undocumented requirements/promises into account.
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Really, then, the best way to provide your child with assurance and ease is to update your documentation sooner rather than later. As you do, it’s always worth appointing a reliable trustee to manage your child’s money until they reach an age of your choosing. Take this chance, too, to consider beneficiary designations on things like your bank accounts and real estate which will ensure these assets are passed to your child without convoluted probate processes.
And, of course, never forget to name a legal guardian to ensure that your child is well cared for from both a financial and emotional standpoint should anything ever happen to you or your partner.
Next, you’re going to want to add your child to your health insurance policy as a dependent, preferably by switching to a family plan that stands to save you significant amounts of money. Admittedly, your new addition isn’t eligible as a dependent until they’re at least six months, so you don’t need to rush right out and take care of this. That said, it is worth researching your options straight away so that you don’t miss out, especially given that there’s often a time limit with regards to employee-provided insurance, in particular.
Ultimately, you’re going to want to ensure an inclusive plan that covers your child for routine healthcare checks in early life, and any injuries or accidents they may have up to the age of 26, or until their income is over half of the cost of their support expenses. This can make a huge difference to your finances later on, as well as ensuring that your child gets the care that they need as soon as they need it down the line.
Speaking of insurance now is also the ideal time to either get life insurance or update your current plan with your new situation in mind. After all, assets aside, this is one of the best ways to ensure that your child is adequately taken care of when you aren’t there anymore. Admittedly, they may be eligible for social security benefits regardless, but this isn’t a given and is unlikely to be enough to keep them in a comfortable lifestyle.
By comparison, life insurance offers a much more reliable, and generally generous, fallback for your child regardless of your family circumstances. Term insurance may be the most cost-effective option here, as you’ll be able to take out a policy for the duration of your child’s dependency. Equally, some employers offer a period after birth during which you can change your existing policy without additional medical examinations, though you will need to check such a policy is portable in case you leave that employment at any stage in the future.
So far we’ve spoken about how you can help your child’s finances once you aren’t around anymore, but most parents also want to help where they can while they’re alive. In light of rising student costs and house prices, especially, securing an in-life investment that your child can fall back on is key.
As such, you’re also going to want to consider where exactly you’re best off investing. Luckily, there’s a range of options, with even just a high-interest children's savings account providing a fantastic springboard for the future. Or, you may prefer an option with a higher-yield, such as real estate, or a business enterprise that keeps on giving. The investment world is largely your oyster, though do avoid high-risk options like trading lest your child ends up with nothing! Make sure that you account for this money in your trust, and make sure, too, that you give it to your child at an age when they’re able to make wise decisions as to how they use it.
Fatherhood is a time of great change, and your finances are no exception in that sense. Understandably, you’ve got a lot on your mind, but each of these steps is simple enough, and it’s guaranteed to make a huge difference to your child’s life, and finances, moving forward.
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