7 Ways to Build a Family Financial Plan

Having a child alters your life as an individual and requires you to take serious measures in terms of your family financial plan to provide for your precious one’s well-being. A child completes a couple and ties them together in an eternal bond. For this tiny human you have created, you are its whole world.

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But if you plan to have kids in your late 30s, it has its advantages and disadvantages. For instance, at this age, you may already have 10-15 years of work experience and are at the peak of your earning capacity. You probably already have a home and have made several investments to secure your future. However, when a child comes into the equation, you must make some alterations in your life and finances. 

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Here are the top 7 financial advice for 35-year-olds and above that can help accommodate your finances in a way that makes the responsibility of parenthood a comfortable journey for you. 

1. Start saving more and spending less 

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When you and your partner are in your late 30s and early 40s, you probably were more focused on living a well-off life-eating out most days, shopping, investing more in the latest gadgets, etc. With the arrival of a baby, now is a good time to re-adjust your priorities. 

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Because your company won’t give you a promotion or hike your salary for having a child, your monthly take-home salary will remain as is until your next appraisal. So, save aggressively. For instance, if you go on vacation twice or thrice a year, you can take once a year or once in two years instead. 

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But remember, making too many lifestyle changes may impact your mind negatively. So, make smart tweaks for a more extended period instead of making drastic changes at once.

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2. Make smart investment choices

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The late 30s is the prime time for making investments. But when you are a parent, you should make your investments carefully. Reevaluate your risk tolerance level and make smart investment decisions.

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• Mutual Funds: Instead of directly docking your hard-earned money on the stock market, start investing more in equity-based mutual funds. This reduces the risk factor tremendously.

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Among mutual funds, small caps have a higher risk than large caps and multi-caps. Multi-cap is your way to go if you are looking for better than average ROI at a slightly higher risk. Where small-cap mutual funds offer 30-35% interest and large caps offer 20-22% interest, multi-cap can offer 25-30% interest.

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• Sukanya Samriddhi Yojana: If you are the proud parent of a baby girl, SSY is one of the best investment options you can consider for your girl child. It offers income tax benefits under section 80C and also allows your girl to withdraw up to 50% of the money once she turns 18 and 100% at 21.

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• Have emergency funds ready: Have 6-9 months’ worth of salary saved in a liquid fund or savings account as an emergency fund. When you have a child, you never know when you might need to use it. So, keep it where it accumulates interest and is easy to withdraw in the time of need. Read our 5 hacks to create an iron-clad emergency fund.

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• Don’t forget to secure your retired life: When you have a child late in your 30s, it also means your retirement date will arrive sooner compared to those who’ve had kids in their twenties. For instance, if you have kids at 39, you have only 21 years to retire. But your child is just 20 years old and still dependent on you financially. So, while you save money for your child’s future and education, don’t overlook your retirement. Remember, your child can quickly get an education loan, but no one will provide you with a retirement loan!

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3. Insure yours & your child’s life

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The late 30s or early 40s is when our bodies start wearing down, and we are vulnerable to developing comorbidities such as diabetes, high BP, stress-related issues, etc. So, it is of utmost importance to get life insurance of a large sum with accidental benefits. You can also get additional coverage until your kid is of age. 

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It can cost you a bit more, but you can rest assured that you and your family are secure until you become 65-70 years old. For instance, a term life insurance at 39 years of age will cover you till you are 70, and the premium charges you will incur are nominal at around ₹13,000-₹22,000.

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While covering yourself with high protection is a must, alternatively, try weeding out insurance policies you probably purchased upon a friend or acquaintance’s recommendation. Instead, invest that money into something more productive.

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4. Add your child in your family floater health insurance policy

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Health insurance is as vital as life insurance for any person with a family. With children, your medical expenses are more. Their immune system is not quite strong, so they are more prone to falling sick than adults. You must include your child in your floater health insurance policy to avoid unnecessary medical expenses. You can also get a top-up to increase your coverage surplus.

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5. Write a will

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A will is one of the critical financial decisions many people overlook. If anything unfortunate happens to you, your family’s future will not fall apart. So, ensure you prepare a will and assign someone you trust the most as executor of the will until your child becomes an adult.

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6. Have a secondary career

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Many people today are venturing out on an entrepreneurial journey while having their full-time job as their primary source of income because when you have kids, your expenses increase tremendously.

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Assuming you are well-settled in your job by the time you are in your late 30s, now you have ample time to spend with your family and start a second career. You can make great money in your 30s if you plan your time smartly. This will help you, especially after you retire and your kids are still financially dependent on you.

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7. Reduce your debt

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When you are in your 20s and early 30s, many millennials accumulate a substantial amount of debt in the form of credit cards, personal loans, car loans, etc. However, when you reach your late 30s and start family planning, you must develop good financial habits to reduce or eliminate those debts to a minimum. 

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Carrying forward debts year on year, making late payments, maxing out on credit cards, or multiple debt applications severely affects your creditworthiness. As a result, you get a bad credit score, your credit utilization ratio reduces, and ultimately you become ineligible to borrow money even in an emergency. So, implement those financial lessons you learned in your 20s and improve your status as a responsible borrower.

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To help you to improve your credit score, read our blog on 5 Vital Factors That Are Responsible For Bad Credit Score & How To Avoid Them.

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Before we wrap up

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We hope these seven finance lessons were helpful and have given you a clear idea of how to do your financial planning while you concentrate on your family. Remember, having a child is as much of a family decision as a financial one. Make the right choices and prioritize needs over wants to give your child a happy life and secure future.