3 major life events that require family financial planning

When you finally get to put your feet up and close your eyes after a whirlwind wedding weekend, or during the exhausted, exuberant days after a baby is born, you (understandably) probably aren’t thinking about family financial planning. But you probably should be.

While there are many changes that could impact your finances at any time, such as a raise at work, moving, or unexpected vet bills, there are some that can require a significant shift in your family financial planning. Getting married, having a baby, and sending a child off to college are three of these major life events that often require you to review, revise or revamp your finances. It may seem like an overwhelming task. But financial planning for the family can ease your money worries, help you leverage tax strategies to your advantage and better plan for your future.

Whether you’re tying the knot, welcoming home a new baby, or sending one of your own off to college, here are a few tips to help you complete financial planning for the family:

Getting married

When you’re single, your focus is on your own expenses, debts, and priorities. As you enter a serious relationship and begin to combine your life with another person (who has his or her own expenses, debts, and priorities), it can get a bit complicated.

“The biggest challenge by far is figuring out how to manage money together. Who is paying the bills? What are you saving for? What is a reasonable amount of discretionary spending? Where is your money held?” say Matt Becker, CFP^®, founder of a financial planning practice focused on working with new parents. “No matter how close you are, you will absolutely have different opinions about these things and you’ll have to work hard to listen to each other and create a system that works for both of you.”

Reconciling different value systems around money can be challenging for many couples. This is often when couples call in a professional with expertise in financial planning for young families as a resource. Figuring out how much money you’ll need to fund your financial goals (and deciding what those are specifically—buying a house? International travel? Early retirement?), reviewing retirement accounts and maximizing your company benefits as a couple are all ways to merge your finances and plan for your future. These are some of the key elements to include when doing family financial planning.

But to meet your goals and realize savings, talking is key.

“Lack of communication is the biggest obstacle I see to financial success,” Becker says. “You really need to be talking regularly to each other about both your short- and long-term goals to make sure that you’re on the same page and that everyone’s needs are being met.”

Having a baby

According to Costhelper.com, the cost for full-time childcare for a two-year-old is an average of $611 a month in the U.S. That’s why having a baby can dramatically change financial planning for young families.

“Everyone knows that childcare is expensive, but it’s hard to understand just how big the cost is until you’re faced with paying the bill every single month,” Becker says. “It’s a real struggle for a lot of parents.”

If you plan to have children one day, setting aside savings as early as possible for some of the bigger expenses, like transportation and housing, can help. Healthcare, for both mother and child, and baby gear can also eat into your household budget and should be factors when financial planning for young families. And there are essential recurring expenses that parents need to prepare for as well, such as larger grocery bills, diapers, clothing, toys, and, eventually, education.

When financial planning for young families, it’s more important than ever to prepare for difficult times, too. Insurance can protect your family if you or your spouse are injured and can’t work, for example. Have a plan in place in case a spouse dies unexpectedly. It’s not easy to talk about, but it will bring your family peace of mind.

“Life insurance, disability insurance, and basic estate planning are all crucial for young families, and they’re not always cheap,” Becker says.

Sending a child to college

College costs have risen over the last decade, according to Bankrate. While you might be looking forward to your years as an empty nester, college expenses can lead to some considerable changes in your family financial planning. Consider the following:

1. Your budget

More of your disposable income might go toward tuition—the major college expense—but there are other college-related costs to consider when financial planning for the family, says Laura A. Seymour, CFP^®, investment advisor in Edina, Minnesota. Those additional costs could include college visits, fees for standardized tests and applications, dorm room decorations, study abroad, and holiday travel home. Making sure your budget accounts for these new costs is essential.

Part of financial planning for the family—college edition—might include finding ways to free up cash from your monthly budget while your child is still in high school (those years can fly by) so it’s available to cover college expenses. You may also want to sit down and talk with your child about whether they will make financial contributions to their education.

“As the child starts college, the family will want to discuss if the child is expected to work and earn any income during college,” Seymour says, “or will the child have an ‘allowance’ or money to spend from the family.”

2. College savings and financial aid

Seymour suggests setting up a 529 college savings plan early. As in, after you’ve had a child. These accounts allow you to save for college and later withdraw the funds tax-free for qualified college expenses.

In addition, when thinking about financial planning for young families, there are some other ways to save for higher education costs.* Those include:

• A Roth IRA: A retirement account funded with post-tax dollars so there is no income tax on withdrawals
• A Coverdell Education Savings Account, or ESA: A tax-advantaged account where withdrawals for qualified education expenses are tax-free
• The Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA): A way to give children money, property, or securities through custodial accounts (Please note: To apply for a Discover® Custodial account, you must do so over the phone. Call us at 1-866-515-5283.)

And of course, financial aid can be factored into your financial planning for the family. Your child might qualify for federal grants or loans, depending on your income and how many children you have in college at the same time. Fill out the Free Application for Federal Student Aid (FAFSA). If the college has scholarship funds or other private endowments for which your child is eligible, Seymour recommends applying to those as well.

3. Helping your child after college

Many children move back home for a time after college. According to the Pew Research Center, one in three U.S. adults ages 18 to 34 live in their parent’s home.¹ Even for those who are living on their own, many may need financial help from their parents as they look for jobs and make student loan payments.

Bridget Handke, CFP^®, financial advisor at a financial planning and investment management firm, encourages parents to keep in mind their own ability to save for retirement when helping support adult children. This can be an important part of family financial planning. Asking adult children to pay rent, do some regular chores, and save for their own emergencies can help offset the additional financial assistance parents provide.

Family financial planning: Making a plan for the future

Revisiting your goals yearly is necessary to stay on track with family financial planning. However, major life events that change the dynamic of your family and, potentially, the strain on your savings, may require special considerations when it comes to financial planning for the family. These changes can also have a ripple effect on other areas of your life, like your tax payments, how soon you can retire, and other financial goals such as traveling or buying a home. But careful planning during major milestones and lifestyle changes can ensure you meet these goals and maintain your financial stability for many years.

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.

*The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. Please consult your tax advisor with respect to information contained in this article and how it relates to you.

¹“Young adults in the U.S. are less likely than those in most of Europe to live in their parents’ home.” Pew Research Center, Washington, D.C. (May 3, 2023) https://www.pewresearch.org/short-reads/2023/05/03/in-the-u-s-and-abroad-more-young-adults-are-living-with-their-parents/.

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