Wise future parents make financial plans for the arrival of the newborn child, but they may not fully comprehend the expense of parenting, the need for budgeting and the need to save in case the original financial plan for raising the little one go astray.
The financial and budgeting projections of people who will someday become parents might be called “best-laid plans”. Such plans are often difficult to follow, or just plain incorrect, something those future parents do not discover until they are months or years into the parenting experience.
Advisors provide guidance to these future parents with the knowledge they have gained through working with clients who have children. That guidance can be aided by the research derived from Spectrem’s new study Parenting and Financial Decisions.
It is impossible to fully comprehend how becoming a parent will impact investment and financial decisions of investors. So it is unfair to mock those future parents for thinking they will spend and invest their assets in a certain way, when no one knows the manner in which their financial picture will change once a child is pulling at the family purse strings.
But here are some valuable points found in the research with those future parents who have a net worth between $100,000 and $25 million, along with a point for advisors to make when talking with those future parents:
· Twenty-one percent of investors without children say they have not yet started a family due primarily to financial constraints. And 29 percent want to increase their financial assets before having children. Those findings beg the question, “What are you doing to improve your financial situation?”
· One-third of investors who do not yet have children expect their savings and investing habits to improve once the children come along. Of course, that does not take into that spending is going to increase at the same time.
· Half of investors who do not have children do not believe their spending habits will change when they have children. That is certainly true, and future parents need to give hard thought to how their spending habits will change prior to having their first child.
It is not only the child who gets slapped upon birth. The parents have a whole new set of priorities and concerns which wake them from their previously childless stupor. Advisors can offer detailed financial maneuvers which can take household finances off the list of worries for the new parents.
©2020 Spectrem Group
Keywords: parenting, investors, advisors, Spectrem, children, budgets, financial planning