The Changing Priorities of a New Dad

A recent conversation with a friend who became a new dad got the author thinking about top tips and an investment checklist. 

By Julie hutchinson, Head of Customer Affairs, Standard Life

 

Did you once play fast and loose with your money, in the days BC (before children)?

 

I caught up with a friend of mine who’d recently become a dad and, over a drink in a pub, he talked me through how life had changed in the last few months.

 

No more investments that are ‘worth a punt’

 

He described himself as a reformed cavalier investor who had seriously de-risked his portfolio.

 

After his small person arrived, he said the change was instinctive and necessary. No more high risk, speculative investments in single company shares that may come good one day. There was more to lose now, and it was no longer just about him. Someone else was now the priority, and exercising influence over his investment decisions without even being able to talk yet.

 

His timeframe for making plans used to be 0–3 years. Now it’s more like 18–25 years, as the prospect of education fees comes onto the horizon. It’s all about the long term now, no more short-term vision. And for the first time, my friend had paid close attention to the tax year-end period. He had made the most of tax efficient investing by topping-up his 2013/14 ISA before it was too late. In years gone by, he hadn’t always bothered.

 

How to save for children

 

We then got talking about the options for how to save or invest for children. He thought starting a child savings account with a bank is the solution to keep aside some spare cash for the young one. Little did he realise that, with the current interest environment providing less than 1% annual interest, that’s no way to be growing a sizeable account for your junior for his changing life needs with investment return that is lower than inflation.

 

I got him thinking about one of the oldest financial advice: it really all boils down to creating a regular savings habit with potential investment returns that could overtake inflation. On top of having a good investment vehicle, having a little one at home does open up a different perspective for new dads when you understand the need to plan for both your future and his.

 

Top tips to help new dads

 

It got me thinking about making a checklist for new dads, which he’d made a start on.

  1. Review your investments.
  2. Consider the risk profile of your investments—do they still reflect the risk you are willing to take?
  3. It’s not nice to think about, but be practical—do you have enough life insurance in place?
  4. Have you made a will (or reviewed your will if it’s updated)?
  5. Have you appointed a guardian to your new arrival, just in case something happens to both parents? You can name this person in your updated will.
  6. Have you made a Power of Attorney, the kind that keeps working if you become unwell? My friend hadn’t thought of this one—but if dad’s the main breadwinner, then it’s vital that his finances can keep ticking even if he has an accident or becomes unwell. His family may be relying on his financial support more than ever, and a Lasting Power of Attorney (Continuing Power of Attorney in Scotland) is important.
  7. Have you updated your Expression of Wishes form for your pension death benefits?
  8. From a workplace perspective, if a death-in-service lump sum is part of your employment package, does your Expression of Wishes form need to be updated?
  9. Don’t forget your pension payments or retirement funding—it’s sensible to try to maintain your long-term savings, even though there’s more pressure on your finances now. Most pensions are flexible and allow you to increase or decrease your monthly payments.
  10. Have you made use of any Child Benefits provided to your family? There could be tax benefits for UK taxpayers or child savings pay outs for Singaporeans.

 

If you’re a new dad and follow these top tips, you can at least make sure your lack of financial planning isn’t the reason for your sleepless nights.

 

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