We hear from Matthew Spradlin, Certified Financial Planner with Godfrey & Spradlin Private Wealth of Steward Partners, about the New Parents Pyramid he and his team created for new parents, as well as the different ways first-time and seasoned parents manage their money and think about alternative assets.Can you give us an overview of the New Parents Pyramid?

Our pyramid is a hierarchy of planning topics we recommend new parents to focus their attention on when it comes to securing the future of their new or growing family. It begins with a foundation in estate planning, including executing a will and basic trust, as well as naming a guardian for their children. The next level in the pyramid centers on securing proper and adequate life insurance for both parents, most notably if one parent represents the main or singular source of the household income. Finally, once these two critical elements are in good order, we advise focusing on both near- and long-term savings strategies, including retirement planning and when to begin considering college savings strategies. This is the remaining component.

What were the big trends and issues that impacted the finances of parents in 2021?

Parents, like all consumers, encountered significant year-over-year increases in the prices of goods and services. In addition to inflationary trends, the evolution of the pandemic continued to add frustration and disruption for working parents. Periodic quarantines in childcare centers and schools created enormous strain for working families, especially for those with two working parents with multiple children.

In 2022, what are some of the trends and issues that could impact the finances of parents? 

A significant number of women remaining out of the workforce has been a lasting negative impact created by the pandemic. The continuation of quarantines and lack of reliable childcare options could continue to place pressure on working moms hoping to return to their previous full-time careers. Additionally, the real estate boom across the country has created steep barriers to entry for young parents looking to purchase their first home. Competing with all cash deals and offers significantly over asking price have made it almost impossible for this new generation to secure home ownership.

How are first-time and seasoned parents thinking about investing and evaluating alternative assets like cryptocurrencies or real estate? 

The approaches from first time parents and more seasoned parents with respect to cryptocurrencies and real estate can be quite different. Newer parents tend to feel more emboldened to accept the greater risk and volatility associated with cryptos given the potential for greater reward with the asset class in recent years. The overall percentage of cryptos within a new parent’s portfolio also tends to garner a more significant weight relative to more traditional assets. The same could be said when it comes to real estate with more seasoned parents. The significant rise in real estate prices along with more employers supporting virtual working environments have created mobility unlike we have ever seen. Seasoned parents that saw their home’s value appreciate considerably throughout the pandemic have been able to take advantage of their newfound equity. Whether it’s the purchase of a second home, starting a new career or business, or even upgrading to a larger home, the parabolic rise in real estate values has offered unprecedented flexibility to current homeowners.

How do seasoned parents manage and think about their money differently than first-time parents do?

I view this within the context of time. Newer parents all hear how quickly time passes with the birth of a child and seasoned parents can absolutely attest to this phenomenon. Seasoned parents, typically further along in their careers, are often keen on taking advantage of savings programs offered through employers or other individual savings opportunities. Ironically, it’s new parents that should take advantage of the one thing more seasoned parents cannot — time. The more time a saver has to take advantage of potential investment growth, the greater the likelihood of success. Even if they are small in nature, anything you can save in your early years, is likely to pay dividends later in life. This axiom holds true across all savings goals.