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Financial advice for new fathers


Friday, June 13th, 2014
Issue 24, Volume 18.
Jason Alderman
Special to the Valley News
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Each year when Fatherís Day rolls around, Iím reminded that I wouldnít trade the experience of raising my two kids for the world. But when I think back to how naÔve my wife and I once were about the costs of raising children, I canít help wishing weíd been better prepared.

If youíre a new dad, or about to become one, youíd better sit down. According to the U.S. Department of Agriculture, a typical middle-income family can expect to spend over $241,000 to raise a newborn child until age 18 – and that doesnít even include prenatal care or college costs.

Right now, youíre probably more worried about getting enough sleep than funding your retirement. But at some point, youíll need to plot out a financial roadmap to ensure your familyís future financial security. As one dad to another, here are a few strategies Iíve learned that can help:

Start saving ASAP. Itís hard to save for the future when your present expenses are so daunting, but itís important to start making regular contributions to several savings vehicles, even if only a few dollars at a time:

* Establish an emergency fund with enough cash to cover at least six months of living expenses. Start small by having $25 or $50 a month deducted from your paycheck and automatically deposited into a separate savings account.

* Even if retirement is decades away, the sooner you start saving and compounding your interest, the faster your savings will grow. If your employer offers 401(k) matching contributions, contribute at least enough to take full advantage of the match.

* Once those two accounts are well established, open a 529 Qualified State Tuition Plan to start saving for your childrenís education.

If funding these accounts seems impossible, look for a few luxuries you could cut from your budget for six months – lattes, eating out, premium cable, etc. After six months, evaluate whether they were actual "needs" or simply "wants" you can live without.

Get insured. If your family depends on your income, you must be prepared for lifeís unexpected events, whether an accident, illness, unemployment or death. Get adequate coverage for:

* Health insurance. Everyone needs medical insurance, no matter how young or healthy.

* Homeowner/renterís insurance. Donít let theft, fire or another catastrophe leave your family without a home or possessions. To reduce premiums, consider choosing a higher deductible.

* Life insurance. Youíll probably want coverage worth at least five to 10 times your annual pay – more, if you want to cover college costs. And donít forget to insure your spouseís life so youíll be protected as well.

* Disability insurance. Millions of Americans suffer disabilities serious enough to miss work for months or years, yet many forego disability insurance, potentially leaving them without an income after a serious accident or illness. Ask about your employerís sick leave and short-term disability benefits and if long-term disability is offered, consider buying it.

* Car insurance. Almost every state requires insurance if you own or drive a car, and for good reason: It protects you financially should you cause an accident or be hit by an uninsured driver. Make sure you have sufficient liability coverage to protect your net worth and income – it only takes one serious accident to wipe out your

savings.

And finally, spend responsibly. If you buy things you donít really need or canít afford, youíll just end up having to work longer hours to pay for them – time you could have spent watching your kids growing up.

Jason Alderman directs Visaís financial education programs.†


 

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