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Welcome back, fellow parent

If you've been paying attention to the markets lately, you know it’s been a wild ride.

With all the ups and downs, it’s easy to feel like you need to do something—anything—to protect your hard-earned money. But before you start making hasty decisions, let me remind you of one thing: sometimes, the best action is no action at all.

I know, easier said than done.

For a moment there, I felt a bit like Sheldon from The Big Bang Theory.

But then I remembered the hot nonsense of the stock market in 2020. There was the crash, then fear-mongering from all the major news outlets (we live in a pay-per-click world), then the rally shortly after.

I’m here to help you keep a cool head and make smart, thoughtful decisions that will benefit you and your family in the long run.

Let’s dive in.

Focus on Long-Term Stability

When the market gets choppy, it’s tempting to jump ship. But selling off investments in a panic can do more harm than good. Remember, investing is a marathon, not a sprint.

Staying the course during tough times is how you build wealth over the long haul.

In my opinion, stick with your long-term plan and continue contributing to your 401(k) or IRA. This strategy, called dollar-cost averaging, means you’ll buy more shares when prices are low, which can boost your returns over time.

This is especially important during market downturns, as you can to buy up shares at a discount. Think of it as stocking up on your favorite chips when they’re on sale. You know you’ll need them later, so why not get them on sale?

The above quote is one of my favorites from Warren Buffett. It speaks to the idea of buying shares of stock when they’re down, as there is a greater opportunity for profits.

I’ve seen folks make hasty decisions in past market downturns—selling at the bottom and missing out on the recovery. But those who kept their cool and stuck with their plan? They’re the ones who came out ahead.

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Two Market Trends to Watch

Market Volatility

Lately, the stock market has been more unpredictable than a summer storm. Tech stocks like Apple and Tesla have seen big swings, and it’s enough to make anyone nervous​. But don’t let the day-to-day drama push you into rash decisions.

If you made an investment plan earlier this year, stick with it. If you don’t have an investment plan, it’s time to start creating one.

Don’t feel pressured to stock pick (purchasing individual stocks). If you aren’t well-versed in business dynamics for individual stocks, I’d personally recommend picking an ETF or similar and stick with it. Start with low-cost ones being offered by your brokerage firm.

For example, let’s say you use Vanguard. A simple search will pull up a list of their ETFs. You can compare each of the ETFs and choose which one works based on your risk level and financial profile. For what it’s worth, VOOG gets a bit of chatter online. It carries a 0.10% expense ratio and an average return of about ~15% since inception. Over the last five years, it’s about doubled.

Either way, diversify your investments to spread the risk. Consider balancing your portfolio with sectors that tend to be more stable, like healthcare or utilities.

Interest Rates & Inflation

Inflation is finally showing signs of cooling, and the Fed might even cut interest rates later this year​. Time will tell.

Why does this matter? If you’ve been thinking about refinancing or taking out a loan, keep an eye on interest rates. A little patience could save you a lot of money in the long run, much like waiting for that perfect sale before buying a big-ticket item.

But don’t rush into big financial moves just yet. Let’s see how things unfold.

What’s particularly interesting is the “expert” discussions around inflation and how it pertains to American consumers. A recent survey confirmed that American consumers believe inflation will drop over the next few years, which is good for the stock market as it is forward viewing. Optimism usually helps push stocks higher.

Interestingly enough, many economists are saying that it’s American consumers’ refusal to pay higher prices which is keeping inflation at bay, according to price sensitivity behavior being reported by major corporations.

What Parents Should Be Doing Right Now

Emergency Fund First

Before you even think about making changes to your investments, make sure your emergency fund is solid. Life can throw curveballs (especially as parents), and having three to six months of living expenses saved up will give you peace of mind.

I will mention that the three to six months of living expenses is really just a broad-stroke number to shoot for. It really depends on your career and lifestyle.

If 2020 taught us anything, you may be out of work for longer than three to six months. If you’re in a high-demand career such as nursing, you likely will be able to find a job pretty quickly. If you teach Latin, it may be a bit more difficult to find your next gig. Adjust accordingly.

One quick tip. Just because you’re carrying cash, doesn’t mean you can’t earn interest on this money. Dump your emergency fund into a high-yield savings account or set up a CD ladder to optimize your return. With the current interest rates sitting where they’re at, you can find accounts offering upwards of 5%.

College Savings Plans

College costs are always on the rise, but don’t let market jitters derail your savings. 529 plans remain a fantastic way to save for your kids’ education​. Regular contributions will add up, especially when the market is down and you’re buying low.

I would keep contributing to your 529 plan, even during market dips. You’re setting your kids up for success.

If you’re not into 529s, consider a UTMA or UGMA. Or split the difference and get both a 529 and a UTMA/UGMA.

Involve Your Kids in Financial Discussions

Now might be the perfect time to start teaching your kids about money. Whether it’s showing them how to save or explaining how the stock market works, these lessons will serve them well in the future.

Start with a simple savings challenge or give them a small, pretend portfolio to manage. It’s a great way to make learning about money fun and practical.

I will say it’s a bit harder than when we were growing up. I don’t hold onto much physical cash and my toddler already asks me to borrow my credit card when we are at the grocery store and asks me to buy her stuff on Amazon.

If you don’t have physical cash, consider using play money. It can serve the same purpose where your kid can trade it in for prizes, gift cards, or that toy/concert/car they’ve been saving up for.

A Final Thought

Put simply, keep calm and invest on. I know the financial markets aren’t great right now and it will likely be a bit turbulent for the next several months (it is an election year).

By staying calm and sticking to your plan, you’ll be better positioned to weather the storm and come out stronger on the other side.

Remember, you don’t have to navigate this alone. If you’re feeling uncertain or just need a little reassurance, reach out—I’m here to help you keep your family’s financial future on track.

Take care and happy investing!

The Dollar Dad

P.S. If you enjoyed today’s email, drop me a money bag emoji (💰). I read every reply and it helps with my email score.