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Becoming a parent changes everything. While you’re busy upgrading the family car, painting bedrooms and purchasing tiny clothes, there’s a side to parenting that is often overlooked; the financial side.
Finances are an essential part of parenting. Just like choosing healthy food options and finding the right school for your children, getting your finances in order can make for a more fulfilling, protected and brighter future.
So, what financial aspects do you need to think about when you become a parent? Here are a few of the big ones.
Financial Tips for Parents
Consider Ethical Investments
When you become a parent, it’s not uncommon for your morals and priorities to change. You might be concerned about the future you’ll leave behind for your kids, and may develop a more humanitarian or environmental focus. Those values can come through in your investment choices. If you’re concerned about climate change or global citizenship, then ethical investing is something you might want to consider.
Ethical Investments can be easily made by doing a little bit of research. Some super funds now have an ethical investment option for your superannuation savings, and there are also exchange-traded funds (ETFs) that you can directly invest in, where your money goes toward companies that contribute positively and sustainably to the environment and society — without having to research individual companies to invest in their stock.
A lesser-known socially-minded, ethical investment option is SDA property. Rather than having an investment property that you rent out to tenants, you build a highly sought after home suitable for tenants with disabilities. The rental income is guaranteed by the government, which significantly reduces any risk associated with the investment. The rental returns you receive are substantially higher than an ordinary investment property as an incentive offered by the government to encourage more people to build these desperately needed houses for vulnerable community members.
Sort Out Your Estate Planning
When you have a family, you’ll want to make sure they’re well cared for — physically, emotionally and financially — if something were to happen to you. By completing a will, you can designate a legal guardian for your child, voice your wishes, and ensure their inheritance is passed over efficiently and managed appropriately.
A will remains in force from the time of completion until marriage or divorce. So if you’ve recently been married or divorced, you’ll need to create a new will as the old one is now void.
Ensure You Have Adequate Insurance
While it’s not a nice topic to think about, proper planning for death, disability, injury or illness is essential. Insurance could protect your family’s future if the worst were to happen and provide peace of mind.
You’ll likely have an amount of life insurance inside your super fund. It’s as simple as logging online to check. Holding insurance inside super works differently from when it’s held outside of super, so it might pay to seek advice from an adviser to decide on the best option for you. They’ll also be able to help you decide on how much cover your family needs.
Keeping your family financially secure when you’re gone could be the most important thing you do for them. The sad fact is that death can strike at any time, and it’s important to know how your family will cope if they happen to lose a breadwinner.
Plan for the future
Most of us know what superannuation is — it’s a fund that you and your employer make contributions into, which is then invested and held until your retire; the idea is to save enough money to fund your own retirement without having to rely on social security benefits — but many of us don’t realise just how powerful a self-managed super fund (SMSF) can be.
One of the main benefits of an SMSF is that you can choose investment types that aren’t available in regular super funds. Direct property is a common investment type in SMSF’s — rather than renting out an investment property held in your name, you can purchase it through your SMSF to earn rental income in your super fund. By doing it through super, you get to enjoy favourable taxation benefits. Another benefit of SMSFs is that you can borrow to purchase assets, which means your retirement savings can grow faster!
SMSF’s aren’t just restricted to property, though; you can invest in anything from listed shares, bonds and even artworks! It’s worth talking to a financial planner about suitable investment opportunities suited to your individual circumstances.
The first few years as parents often come with sleepless nights, making it hard enough without worrying about finances constantly. These tips should help give you guidance on how to provide a secure financial future while still giving your children the love and attention they need.