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How to be a Financially Fit Father


Stawicki's and Irishes

In honor of having just celebrated Father’s Day weekend, we want to thank all of the father’s and father figures out there for all that they do to provide care, support, and beautiful experiences to their children’s lives. Before we dive into some helpful tips on how to be a financially fit and savvy father, we want to highlight a few important fathers in our lives:

Dad's

Being a father is one of life’s most rewarding experiences, but with it comes a host of responsibilities and considerations, especially when it comes to financial planning. Protecting your family’s financial future requires careful thought and strategic action.


Here is a helpful guide for fathers on creating and maintaining a solid financial plan to secure your family’s future.


Set Clear Financial Priorities

One of the best things you can do to start out on firm footing is to establish an emergency fund. This fund should cover three to six months’ worth of living expenses and be easily accessible in case of unexpected events like a job loss or medical emergencies. We actually recommend this for everyone, not just fathers, but considering your responsibilities are a bit amplified as a father, it’s even more paramount. A high-yield savings account is the best place to park this cash since you can access it when needed and earn a respectable amount of interest when you don’t.


The next step is to focus on debt management. Second on your priority list is to pay off high-interest debts such as credit card balances and consider consolidating debts to lower interest rates so you can pay them off faster. If you can manage your debt effectively, you can free up more cash for saving and investing! Start by paying off high-interest debt first, then lower-interest balances such as student loans, mortgages, or auto loans.


And of course, saving for retirement is also a priority. Doing so not only is not only advantageous to you and your family, of course, but it sets a great example for your kids regarding financial independence and resilience. We recommend taking advantage of employer-sponsored retirement plans, such as 401(k)s, and contribute at least enough to receive any employer matching funds - that way, you’re not leaving any money on the table! Additionally, consider opening an Individual Retirement Account (IRA), particularly a Roth IRA, to supplement your retirement savings.


Get Life Insurance

Life insurance is a critical component of financial planning for parents. It ensures that your family will be financially supported in the event of your untimely death. We will go over the two main types of life insurance: term and permanent life.


Term life insurance, as the name suggests, provides coverage for a specific period; typically it’s something like 10, 20, or 30 years. It’s generally more affordable and is an excellent choice for young families looking to cover substantial obligations like mortgage payments, college tuition, and daily living expenses. Permanent life insurance (whole life, universal life, etc.) on the other hand, offers lifelong coverage and includes an investment component known as  $ cash value $, which can grow over time. Albeit more expensive, permanent insurance can be a valuable tool for estate planning and can provide potential financial benefits that term life insurance cannot.


We would be happy to navigate this with you in more detail on a call, but please note that when deciding on the amount of coverage, you’ll want to consider factors such as your current income, outstanding debts, future education costs for your children, and daily living expenses. A common rule of thumb is to aim for a death benefit equal to 10-12 times your annual income, but a more accurate and targeted approach is to use an unbiased life insurance needs calculator.


Start Saving for College

One of the most significant and potentially daunting financial commitments parents face is funding their children’s education. Luckily, starting a college fund early can ease this burden a bit. You’re likely familiar with the 529 College Savings Plan, which is a popular and effective option. These state-sponsored plans offer tax advantages and allow your investments to grow tax-free as long as the funds are used for qualified educational expenses. Contributions to 529 plans are not federally tax-deductible, but many states offer state tax deductions or credits for contributions.


Another option to consider is a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). These accounts can hold various assets, including stocks, bonds, and mutual funds, and offer flexibility in how the money can be used once the child reaches the age of majority. However, it's important to note that the funds become the property of the child when they reach your state’s legal age, which might not align with your intended use. They can also potentially reduce the amount of financial aid for which your child might otherwise qualify, so proceed with caution.


Adaptability is Key

Lastly, sitting down to review and adjust your financial plan at least once a year with us is crucial. Our goal as your financial team is to ensure that your strategy remains aligned with your family’s needs and goals.

As a father, planning for and managing your family’s financial future can seem daunting, but taking proactive steps now can provide peace of mind and ensure your family’s well-being for the long haul. By taking initiative and creating a comprehensive financial plan now, you can lay a strong foundation for your family’s future. Remember, the best gift you can give your children is the security that comes from thoughtful financial planning.


Dad’s or Dad’s-To-Be, click on the link below to set some time with us to discuss your family’s financial future.



Compass Financial Team

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