Can anyone else believe it is already September? This year has to be going faster than ever and there’s scientific proof of it! In August, it was announced that June 29th, 2022 was recorded as the shortest day ever, according to scientists. CBS news interviewed scientist Leonid Zotov and he said, “June 29th, 2022 was 1.59 milliseconds less than the average day.” It looks like our summer is coming to close. This summer we talked about protecting your financial picture as your family grows, knowing where your money is going and taking charge. Today in the last part of our series, I want to share some ideas for growing your finances as your family grows.
As new parents or parents of very young children, you are living in a world of competing needs when it comes to your financial growth. You are walking the line of making sure your family is taken care of in the present and wanting to grow for the future. Let’s dive into prioritizing the energy you have to protect, know, and grow your family’s financial wellbeing!
Growth Rule #1: Have a fully funded emergency fund & reduce/eliminate debt!
Having an emergency fund is essential to growth, because something unexpected will happen—especially if you have kids. Being prepared helps you avoid incurring debt or pulling from investments, especially at an inopportune time in the market. For more details on how much should be in your emergency fund and eliminating debt, check out the second part of this summer series.
Growth Rule #2: Keep (or start, if you haven’t already) saving for retirement!
You may feel like you need to start saving for your child’s education now at the expense of your retirement savings. I want to remind you that you cannot take a loan out for retirement. If you don’t save for the time in your life where you choose to not work anymore or you cannot work anymore due to physical or mental constraints, someone has to pay for it. That could result in a financial burden to your family, undoing those college savings in the first place.
If you are looking for a baseline to start your retirement savings, at the very least get your full match from your employer. An employer match is free money your employer wants to reward you for saving for your future. It varies by employer, so contact your plan administrator to get your current matching percentage. From that baseline, set a reminder on your phone to increase your percentage by 1 to 2% every year until you get to the percentage that suits your retirement goals. If you do not receive a match from your employer, I would say start with 5% of your pay and increase annually by 1 to 2%.
Growth Rule #3: Save for financial goals before 59.5 years old- includes children’s education
Being a millennial means 59.5 years old can be anywhere from 20 to 30+ years away. Why am I referencing 59.5 years old? Well, 59.5 years old is the age you can take from retirement accounts without having to pay an early withdrawal penalty. A lot of life can happen between now and 59.5 years old. Saving in types of accounts that will be more suitable for mid-term needs means you can access those accounts without having to wait until 59.5 years old. You could save in a taxable individual brokerage account or a custodial account for your child or even a 529, an education savings account. Determine a monthly amount you would fit in your family budget to dedicate to this type of account. Talk with a financial advisor or financial planner to determine what type of account(s) would best suit your family’s goals.
The role of being a parent is not an easy one; you have so many things and people competing for your time, attention and energy. I hope this series is helpful in prioritizing your family’s growth and future in the midst of an ever-changing world. A family that dreams and grows together is a powerful force to reckon with!