5 Money Management Tips for a New Father

 

Becoming a father — whether for the first time or otherwise — is always a joyful milestone in life. However, along with the tiny joys of fatherhood, there is also the tremendous responsibility of securing your child’s future. By taking some essential steps today, you can ensure that your child has an adequate financial safety net to fall back on tomorrow.

To this end, here are 5 effective money management tips for a new father like you.

Create an emergency fund

Financial emergencies can occur at any point in life. There may be an unexpected illness in your family, or you may suffer from a temporary job loss. As a new father, it is crucial to create an emergency fund, so you can protect your family from such unexpected financial setbacks. An emergency fund acts as a safety net in case of contingencies like a job loss, unforeseen repairs and expenses, medical emergencies and more.

Experts recommend saving up at least six months’ worth of living expenses in a separate account that you can easily access when needed. To build your emergency fund, set a monthly savings goal and consistently contribute to the fund till it reaches the desired level.

Invest in life insurance

Life insurance is one of the many investment options in India that can help you protect the financial future of your children effectively — even in your absence. There are many types of life insurance plans you can choose from, including:

• Term insurance, which is a pure life cover that offers death benefits
• Endowment plans, which give you the advantage of a life cover and guaranteed savings
• Unit Linked Insurance Plans (ULIPs), which combine the benefits of insurance and investments
• Child insurance plans, which help you save up for your child’s major milestones
• Annuity plans, which give you regular post-retirement income.

Save up and invest for your child’s higher education

As a new father, you will also have to start saving early for your child’s higher education. With the costs of graduate and postgraduate courses rising on account of inflation, it’s important to plan ahead and ensure that your child’s education is adequately funded. You can begin this journey by considering the following investment options in India:

• Public Provident Fund (PPF)
• Sukanya Samriddhi Yojana (SSY)
• Mutual funds
• Employee Provident Fund (EPF)
• Direct equity
• Fixed deposits

Pay off high-interest debts

You also need to prioritise paying off high-interest debts to improve your financial standing and redirect your savings towards long-term investments. Some common examples of such high-interest debts include credit card debts and personal loans. These debts can accumulate quickly, leading to financial stress if you do not pay them off on time.

To avoid this pitfall, identify debts that carry high interest rates and create a debt repayment plan that prioritises such liabilities. You can even consider methods like the snowball method or the avalanche method to pay off your debts strategically.

Prioritise retirement planning

Retirement planning is crucial for you if you are a new father with young children, because it ensures that you can remain financially independent even in your golden years. Start contributing to retirement accounts early on, when you are young, so you can take advantage of the power of compounding.

Some investment options in India that you can explore for this purpose include:

• National Pension System (NPS)
• Employee Provident Fund (EPF)
• Annuity plans
• Senior Citizens’ Saving Scheme (SCSS)
• Post Office Monthly Income Scheme (POMIS)

By maximising your contributions to these accounts or schemes, you can build a substantial retirement corpus. Furthermore, you also need to regularly review and adjust your retirement plan, keeping in mind factors like inflation, your changing lifestyle goals, and the prevailing regulations in the country.

Conclusion

You can always customise the strategies outlined above and align them with your specific financial circumstances and goals. In addition to this, it is advisable to consult with a financial advisor who can give you more clarity about how you can tailor your money management strategies according to your specific requirements.

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ARN: ED/07/23/3093