How do I… plan for a family?

Enter parenthood with joy, wonder and a strong financial plan

Starting a family is a wonderful experience, and a time of happiness, and hopefully not a time of stress. From diapers to daycare, college to their first car, you'll need to plan for a new, uncharted future.

Family financial planning is the process of looking at your current financial situation, predicting future needs and creating a plan to prepare you for all stages of life. Strong family finances ensure you have enough money to provide for your family while still fulfilling your financial goals.

Feeling overwhelmed? Don’t worry, family financial planning can be done in small steps. This guide will walk you through the basics.

Understand your financial situation

The first step of any family financial plan is to know where your finances stand today. Take stock of all your assets, like investments and savings accounts, as well as liabilities, such as mortgages or credit card debt.

You may be surprised to see that, when you write it all down, you're in better financial standing than you thought. Or, maybe you uncover a few areas that need a little extra attention.

Even if you do have debt, don’t be discouraged. There are many ways to manage your debt and still plan for a family, a mortgage, and a healthy, happy future.

Set financial goals

Once you have a better understanding of your financial situation, it’s time to set some goals. Planning for your family finances can help you make the most of every dollar and reach your goals faster. It also helps create structure, so you know where your money is going and how it’s used.

Start with long-term financial goals like saving for retirement or paying off your mortgage by a certain age. Then, work backward and create short-term financial goals that will help get you there. Setting smaller milestones can make the process easier and more manageable.

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Create a budget

Next, you'll need to create a budget. This way, you’ll know how much to save each month on top of the essentials. Then, you can clearly see what kind of adjustments need to be made to prepare for the addition of a family member.

Your budget should include all your necessary expenses, such as:

Housing costs
Food
Transportation
Utilities
Money for emergencies and savings

After your budget is complete, be sure to track your spending each month. If you consistently go over budget in any area, look for ways to reduce costs. Or, if you’re spending less in one area, you may find you have extra finances to save for your family's future.

Five things you can do to budget for a new family member

Open a savings account for your child's future needs, such as childcare or car payments
Explore government benefits for families and parents to see if you qualify for support
Make sure you have the proper life and health insurance coverage to cover any medical expenses that may arise
Consider consolidating debt or creating a debt repayment plan to get debt-free faster
Research different financial products, like a Registered Education Savings Plan (RESP), that can help you save for your child's future needs

Start saving

Now that you have a budget, set aside money each month toward your goal of starting or growing your family.

Create an emergency fund by putting away small monthly payments into a savings account. This will help cushion any unexpected expenses related to raising a family, going on vacation, or unexpected medical costs.

Also, consider setting up a college savings plan or other long-term investments. Registered plans like a Registered Education Savings Plan (RESP) let you defer taxes while you save, giving you an extra nest egg for your child’s future education.

The earlier you begin investing in your family’s future, the more flexible you can be when your children reach adulthood.

Invest for the future

Investing is another great way to grow wealth and secure your family’s financial future. Investing can be intimidating, especially if you’re new to it, but there are many resources available to help.

Start by educating yourself on the basics of investment strategies like stocks, bonds, mutual funds and ETFs. Decide what risk level you’re comfortable with and how much access you’ll need to your money.

Then, look for the right investment plan that suits your individual needs and risk appetite. Remember, investing is best done with a long-term outlook rather than short-term gains.

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Get insurance coverage

While it might not be the most exciting part of family planning, having the right insurance coverage can give you peace of mind and ensure that your assets are protected in case something unexpected happens.

Look into life, critical illness and disability insurance that can offer protection in the case of illness or injury. As well, consider homeowners or renters insurance to protect your family and possessions. You should also get coverage for vehicles, as well as any valuables such as jewelry or art.

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Plan your estate

While it may seem odd to plan for the end of your life when you're just starting out, it's important to have a plan in place for what should happen in the event of an unexpected loss.

Creating an estate plan can help ensure that your financial wishes are met and that your family is taken care of in the future. Look into setting up a will, trust fund or other legal documents to make sure your assets are protected. As well, consider naming a guardian for your children in the event you and your partner are no longer able to care for them.

Living benefits, such as critical illness and disability insurance, can also help protect your family if your health changes suddenly and you’re no longer able to provide for them the way you once did.

Remember, you don't have to do it all on your own. It can be helpful to talk to an advisor or lawyer who specializes in estate planning and family finances. They can help answer any questions you have and ensure that your plan is fit for the future of your family.

Learn more about estate planning

Need help with family financial planning?

It's never too early or too late to start planning for your family's financial future. Our advisors are here to guide you, from setting up a registered savings account to insuring your family.

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