Dad talk

Dan and his squeeze recently had a kid. The first. A girl.

As with most new parents, his mind went somewhat to goo. But as an entrepreneur, he’s trying to be analytical, too. Fortunately he’s a blog dog. So there’s hope.

“You provide a lot of great guidance, motivation and the general assurance of the right path to chart,” his MSU reads. “My wife and I are parents to our 17-month-old daughter with another on the way. Our first priority for our daughters is a loving home, protecting their well-being, and showing them all we know about leading a great life – one that is rich with experiences, education and generosity to others.” That’s the goo part.

“As a small business owner and entrepreneur I am often thinking about what I can do now that will change their future for the better – perhaps give them opportunities that I did not have growing up or as a young adult. Might you consider providing a “primer of sorts” on what to think about, plan for and perhaps importantly what not to do when it comes to planning ahead for children’s financial future?

“These are a few things on our radar – would be glad to add others:

1. RESP is in-place for our 17-month old and fully funded
2. TFSA I understand we cannot establish yet
3. Insurance advisor has put some insurance ideas on the table (critical illness and permanent par life insurance)

“I would like to take steps today with the resources we have to ensure that financially speaking both daughters are setup well for their future. For instance, rather than focusing on buying a house, what if we could help fund more than just their education. Maybe capital to buy or start a business?!”

First-time dads are so cute. At less than a year-and-a-half old he’s planning out the next few decades for his girl – who might end up in tats, piercings and a Rats tribute punk band. But it’s noble.

Yes to the RESP. Dan should plunk down $2,500 a year to garner the free $500 from the feds. (Depending on where he lives there may also be provincial money.) Of course, he could contribute the entire $50,000 maximum, but would miss out on all but two years’ worth of grant money. However, so long as he opted for growth assets in the plan, in two decades this is the winningest strategy.

No TFSA until the kid is 18, of course. Then it makes sense for parents to dump in the maximum annual contribution (whatever it might be in 2040.) Ditto for the FHSA, with a minimum age of 18. Unlike TFSA room, which carries forward indefinitely, this plan allows only one year of catch-up – and a plan must be opened in order to trigger room (also unlike the tax-free account). Bear this in mind.

Life insurance?

There’s a reason life agents drive Porsches, because they sell guilt and obligation. Forget a pricey permanent participating life or whole life or universal life scheme and just buy some term insurance if you want. Ten or twenty years is fine. Premiums are cheap. In the unlikely event it’s needed before the child becomes and adult, that’s more than enough.

The best investment, however, is you. And your marriage.

Through their entire lives children have a need for parental stability, security and resources. What can be more important than knowing they can always come home, retreat to you, get the support and uplift they need to navigate life? You never wish to fail financially and become a burden on your kids. You want to offer monetary as well as emotional structure when needed most. Children should never worry about the viability of their parents’ lives, nor – if possible – the unity of purpose and direction of their relationship.

What does this mean?

Don’t sacrifice financially for an infant at the cost of your own saving, investing and retirement planning. That’s not altruistic. It’s dumb. Likewise, real estate ownership is lost on young kids. They just don’t care if you rent or have a mortgage. A common mistake of people who say, “we’re pregnant!” is to run off and make an offer on an overpriced house and backyard. Wait. Do that (if necessary) when you have the means. Make a will. Today.

Stay married. Work at it. Divorce or separation is a great way to destroy family finances, disadvantage everyone, curtail opportunities, breed negative emotion and fracture the stability that can support your children forever.

Yeah, relationships break down. So it takes some effort. Be unselfish. Be understanding. The rest comes easy. (The good news is the divorce rate in Canada sits at a 50-year low.)

Buy her a business down the road, Dan? Nope. Seed capital? Maybe. But make it a loan. Always remember how much you value and take pride in your business because it didn’t come easily. Apply that lesson to everything. No goo. Man up.

About the picture: “This is my friend’s dog Lucy,” writes Lawrie. “After a nice hike at Forks of the Credit, we ended up at the venerable Belfountain General Store. Lucy loved the cafe because of its pet-friendly policy, the free treat she ordered, and the attention she always draws from strangers as a dog/pony mix (aka Great Dane). Love the blog!”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’