How Being A Dad Changes Your Financial Planning


It’s Father’s Day again! It may seem underrated when compared to Mother’s Day, but the contribution of a father should be equally celebrated. The responsibility that a man carries as a father is mind-boggling! Who do you think goes through sleepless night trying to balance the household’s finances to ensure their kids get into the best schools?

To ensure new fathers don’t have to go through the same sleepless nights, we have four key financial moves that will bring any fathers (new or old) the peace of mind they need!

The first thing on a Father’s mind when starting a family is the need to plan for their financial future. What do they need to know about meeting a family’s financial obligations?

1. Getting (adequate) insurance

Being a new dad means that you’re bringing into this world a little human that will depend on you 100% — for everything. What would they do if you suddenly stopped being around?

It’s a morbid thought but one that needs to be addressed the moment your child is born.

It’s important that you review your life insurance policy by increasing your sum insured. That way if something happens to you, your family’s future financial needs will be adequately covered.

You should also get an insurance policy for your unborn child and your pregnant wife (from 18 weeks onwards) and then transfer it to an insurance or savings plan policy for your newborn baby.

2. Update your beneficiaries

Parents often get drowned in the motions of welcoming a newborn baby (surviving on a few hours of sleep every night can do that to you), that they overlook this important step of parenthood.

This should be done periodically and not just for new dads. If you have a second or third baby, you should also update accordingly.

This doesn’t just apply to your private insurance policies (from life insurance to mortgage life insurance) but also to your Employee Provident Fund account and company insurance policy (if any).

3. Saving for your child’s education fund

Starting your child’s education fund the moment he or she is born (or even before) may seem like overkill, but once you find out how much it’ll cost you to send your child to college when he or she reaches 18 years old, you will understand why.

You would be balking at the cost of education and if possible you should start planning for their education as soon as possible.

So, how much will you need for a 3-year course in Harvard if you have 16 years to save? Historically, college fees inflation is an average of 5% a year. However, to be on the safe side, most people save more by using 6% inflation rate to calculate the total they will need. With 6% inflation, the total cost of a 3-year course will be RM672,691.50.

You will have to save RM42,043.20 a year for the next 16 years, which brings us to the next financial move every father should consider…

4. Review your investment portfolio

Investing is no longer just an option for fathers. Let’s face the facts, not everyone can afford to save RM42,043.20 a year! The only way to protect your money as you save is to put it in an investment that will bring you returns high enough to beat inflation.

On the conservative side, if you choose an investment with an average 7% return every year, you will still need to save RM21,812.15 a year, and that’s RM1,817.70 a month. Still a lot, but that’s almost 50% lower than the initial amount!

Other than your sleeping pattern and social life that changes with a baby, you should also anticipate a big change in your investment portfolio. As a new father, it is understandable that your risk tolerance would be much lower than before – you don’t have the luxury of losing money in your investment now.

It is important for fathers to review their investment portfolio to reflect that. With an additional financial goal (saving for your child’s education), your portfolio is in for an overhaul. Don’t worry, as your child becomes older, you will be able to adjust your portfolio to riskier investments as you see fit.

Being a father for the first time doesn’t have to be overwhelming if you put these four financial moves in place. You and your loved ones will be better off for it. And the best part? You get to be celebrated every year as the best father in the world by your kids.

Happy Father’s Day!

Leave your comment