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Financial and Estate Planning for Young Professional Parents: 7 Key Considerations

A recent Caring.com survey found that nearly four in five Millennials (78%) and 64% of Generation Xers (ages 37-52) do not have a will or living trust. Considering how many of those young adults are parents, homeowners and investors in their prime earning years, those are disturbing statistics.

Planning for the future is always a good idea. It’s an even better idea if you have young children and you have significant earning potential. Many young professional parents can benefit from basic financial and estate planning, even if they believe they are not old enough or wealthy enough to warrant it.

Below are some key financial and estate planning considerations for successful couples in the early stages of their career trajectory.

Financial Planning

1. Maximize Your Employee Compensation Package

Employer-sponsored retirement plans such as the ubiquitous 401(k), are designed to help workers save for retirement consistently and efficiently. Many employers provide incentives like matching contributions to encourage plan participation. Your contributions are tax-deductible and earnings inside the plan are tax-deferred until you withdraw them in retirement.

Many employers also offer additional benefits such as Employee Stock Purchase Plans, Health Savings Accounts, and reimbursement for gym memberships and health-related expenses. Each company differs in benefit packages so ensure you fully understand your new company’s benefits before e-signing on the (digital) dotted line.

2. Enroll in a 529 College Savings Plan

A 529 college savings plan provides tax-free growth of your savings and tax-free withdrawals for qualified college expenses when your little one is ready to leave the nest. Most plans allow you to invest in a wide variety of assets, based on your risk tolerance and time horizon. Age-based portfolios are one way to go, as they are very aggressive when your child is young and automatically re-allocate to be more conservative (thus reducing your risk exposure) as your child ages. In many ways, age-based portfolios follow a similar “glide path” as your retirement savings plan.

3. Decrease Debt

Most young professionals feel burdened by student debt, car loans, and large mortgages. Pay off high-interest rate credit cards first and then create a plan to pay down additional debts. Once you accomplish your goal of paying off a specific debt, congratulate yourself and direct your extra cash toward another debt, focusing first on debts with higher interest rates.

4. Evaluate Risk Management – Life and Disability Insurance

Having an appropriate amount of life insurance in place ensures that your family is financially protected if you die prematurely or suffer a disability that prevents you from working for long periods of time. It is common for young professionals to need several million dollars in life and disability coverage, especially if there is only one working spouse. Most employers offer very basic life and disability coverage that falls short of what high-earning young couples need. We recommend that you obtain a supplemental policy to cover the gaps. Also, consider insurance for a non-working spouse as premature death or disability in their case would most likely affect the family’s situation and finances. The ideal time to acquire insurance is when you are young and healthy, as you are in the best position to lock in lower rates and more favorable terms. 

Estate Planning

Many young parents believe they are neither old enough nor wealthy enough to need an estate plan. However, basic estate planning documents cover more than just “who gets what” when you die and chances are, you could benefit greatly by having these documents in place. Let’s take a closer look at three of the most important estate planning considerations.

1. Selecting a Guardian for Your Young Children

Estate planning documents allow you to name a guardian (and alternate guardians) for your minor children. These provisions are very helpful in rare circumstances when parents die while their children are under the age of 18. Parents who name guardians in their estate planning documents can put their minds at ease knowing their children will be cared for by individuals of their choosing, not the state’s.

2. Selecting Agents to Make Financial and Health Care Decisions on Your Behalf

Basic estate planning documents often include Powers of Attorney (POA), which allow you to appoint trusted individuals to manage your affairs in the event you become incapacitated (for example, if you become seriously ill or disabled). A Durable Power of Attorney (DPOA) for financial matters allows individuals of your choosing to manage your assets and to make financial decisions on your behalf.

A DPOA for Health Care allows individuals of your choosing to make decisions regarding your healthcare, including medical procedures and end of life care. Many individuals name a spouse, sibling, or a trusted friend to serve in these important roles. You don’t need to name a single trusted person to fulfill the duties —in fact, many people split this responsibility among multiple trusted family members and friends. Executing Powers of Attorney is prudent regardless of your financial status since in their absence, a complete disability could result in a court-imposed guardianship over your person and/or finances.

3. Selecting Fiduciaries to Manage Your Estate and Your Children’s Inheritance

Estate planning documents also permit you to select individuals or institutions to manage your wealth for the benefit of your children (or other beneficiaries) at your death. For example, if you establish a trust for the benefit of your children, it is essential to select the appropriate trustee to manage the inheritance your children may receive. Selecting trusted individuals in important fiduciary roles comforts many young parents, particularly those with financially inexperienced children.

When you have estate planning documents in place that cover more than just the transfer of your assets, you’ll gain the peace of mind that comes with knowing your wishes will be honored when you pass on.

Create a Plan

Nobody enjoys contemplating their own death, but we’ve all encountered situations in which a family’s primary breadwinner passed away or was disabled during their prime earning years. Planning for the possibility of these events when you are young and healthy is the ideal time, since insurance rates and actuarial tables are on your side. You will have decades of peace of mind knowing that you and your family have a plan and are protected should a worst-case scenario impact you.

James Nevers,CFP® is a Senior Advisor at Soundmark Wealth Management, LLC. James works closely with physicians, business owners, directors and executives at Amazon, Microsoft, and Boeing, and other successful individuals to help them define their financial goals and implement an ongoing financial planning process.


This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing. Soundmark Wealth Management, LLC, its advisors and its affiliates do not provide tax or accounting services. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax or accounting advice. Please consult with your tax advisor prior to engaging in any transaction.

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