Oran Hall Fathers as financial guardians, enablers
Happy Father’s Day to all fathers. Today is probably the best day to look at the critical role fathers should play in the lives of their families.
While there is a variety of settings in which fathers are located, there are some basic responsibilities that fathers have and certain expectations that we have of them.
Some fathers are in committed relationships in which they are formally married to the mothers of their children, or they may be in common-law relationships with them.
Others may be single fathers raising a family. Others may just be fathers who just have a visiting relationship with the mothers of their children. Others support their families from a distance, and much as we would love not to have any of this type, there are those who are missing from the lives of their children.
Truth be told, we need fathers who play an active role in the lives of their children, especially to provide for them and to give them financial security as well as to equip them to have a good relationship with money for the duration of their lives.
Some fathers are better able to provide for their children because they have the means, but if those who are less able are able to develop the skills to make their money achieve much, it is fair to say that they are in a better position to raise children who are more empowered to master their financial affairs.
There are some specific matters that fathers, regardless of means, need to pay attention to, including long-term security, preparing for uncertainty, budgeting, savings, investment, financial education, and estate planning.
By long-term security, I mean providing for the long-term needs of the family even in the absence of a major bread winner. While we are alive, we are able to earn if we are in good health.
But what if premature death comes? Will there be resources to provide for the needs of the children in particular? Can their day-to-day living expenses be covered? What about their education? If the answer is no, it could make sense to consider life insurance, perhaps the cheaper form, term insurance, initially.
Another what-if could be injury, which could remove or limit the ability to work and earn. In this case, disability insurance could be considered. Then what if there is sickness? Can health insurance be of help? For fathers whose employers offer group health insurance, are all your children covered?
Even with the best-laid plans, unanticipated events – we call them emergencies – may arise and we have to address them, meaning we have to present the money to deal with them. An emergency fund is the best solution for this, better than borrowing. This can be established over time and can take the form of financial instruments that can be converted to cash easily.
The key to managing money effectively is a good budget, which spells out clearly income from all sources and every form of expenditure. In the setting in which the parents, or parent, and the children live together, it is easier to make an effective budget, but this does not mean that it is impossible to make one in other circumstances.
Making the budget can be very useful in helping the children to learn how to spend and to understand how income is earned. It is not imperative that the father be the lead person in creating and managing the budget. The family should be involved, but the mother or even one of the children who might be more comfortable with such matters can take that position.
A good budget should make it easier to generate savings, for savings should be one of the first items, and not what is left over. In fact, treating savings as a residue could lead to no savings being made, and if there are no savings, there can be no investment.
Fathers should commit to investing some of their income to improve the prospects of growing the financial resources of the family. Contrary to the view of many people, it does not require a significant sum to start investing. Unit trusts and mutual funds are good instruments to start with, but it is advisable to learn even the basics of investing before engaging.
Responsible fathers put their house in order by making a good estate plan, taking care to ensure that all their assets are included and that the people they want to benefit do so. Additionally, they should ensure that they have clear and undisputed ownership of their assets, which is properly registered. Fathers should have an up-to-date will at least. Other tools can also be used, for example, a trust and joint ownership of assets.
So, fathers, as you are feted today, spare a moment to plan how you will use your financial resources for the maximum benefit of your family and how you will model good financial behaviours for your children, and bear in mind that what you do should be tailored to your own unique family situation.
– Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser.jm@gmail.com