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Newlyweds: Get a Financial Head Start

If you are newly married with no children, you may have a special opportunity to build your savings and investments. Financially, a married couple can be more than the sum of its parts. One spouse can work steadily, while the other studies for a college degree or launches a promising business. Or, if both spouses hold jobs, you can try to live on one paycheck and save or invest the other paycheck.

Couples starting to build a life together face many financial challenges. While you may have more investment opportunities, they may entail more complex choices. Above all, it is important to develop an investment portfolio that balances your goals with your resources and risk tolerance. Proper asset allocation and portfolio diversification can help you manage risk. Here is a general list of some financial “I do’s” for newly married couples without children:

  1. Do build up your savings, and consider investing more for growth over the long term than for current income. Mutual funds offer a range of investment choices from aggressive stock funds to more conservative bond funds. Be aware, however, that investment returns and principal values of mutual funds will fluctuate according to market conditions. When shares are redeemed, they may be worth more or less than their original cost.
  2. Do put money away in retirement plans offered by your employer. These programs often provide both current and future tax advantages.
  3. Do use life and disability insurance to help protect both spouses in the event of death or disability.
  4. Do be financially flexible in the event that “baby makes three.”

Financial planning for parenthood is a bit like preparing for a long journey. As parents, you may have to stretch your budget to accommodate pediatrician bills, music lessons, and summer camp. The costs of rearing a child until the age of 18 can add up…and then there’s college.

When navigating the road from diapers to diplomas, make your first financial objective to establish an emergency cash reserve to provide necessary funds for unexpected events. As you concentrate on your long-term goal of building capital, consider systematic investing.

One of the more popular systematic strategies is dollar cost averaging. With this approach, you invest a set amount at specific intervals, which means you buy more shares when prices are low and fewer shares when prices are high. Over the long term, your average cost per share may be less than the average price per share, thus allowing you to take advantage of the increases and decreases of the overall stock market. While systematic investing does not guarantee a profit or protect against loss, it may increase your potential return.

If you ask young couples why they are saving, you will generally learn that many consider owning a home their highest priority. So, what is the best way to save for the “Great American Dream?” For many, one answer may be monetary accumulation.

Saving takes perseverance and discipline. Those who save the most are generally willing to give up minor pleasures and control spending. As newlyweds, it’s up to you to get a financial head start. Your bright and prosperous future together starts now!

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