Last Updated on April 24, 2024
Babies are adorable! And there’s nothing like staring into your own baby’s eyes as her tiny hand grasps your pinky. Yes, babies are sweet and cuddly and oh-so-precious. But they’re also expensive. In fact, you don’t stop shelling out money until they graduate from college. Even then, you may find yourself digging into your wallet to help them with rent, groceries, a wedding or a down payment on a car.
The USDA reports that it costs around $233,610 to raise a child from infancy to age 17. Since those precious bundles of joy require so much money to keep them happy, healthy and safe, it’s crucial that parents become pros at financial planning. Why? Financial planning can improve your physical and emotional health as well as increase your overall happiness. Here are the top seven ways you can start financial planning to safeguard your future and the future of your kids.
Get Your Budget Together
Budgeting your money helps you plan for the essentials. Babies need formula, diapers, child care, toys, clothes and a host of other items. These expenses don’t even consider the money you must pay for your mortgage, car payment, gas for your vehicles, utilities, food, clothing for adults and other basic needs.
By ‘cutting down’ on your cable bill, cell phone bill, or even your automobile payments, you can ‘sock away’ an extra $1000 to $2000 per year. This money could then be redirected to your retirement plans, or maybe a child’s college savings account.
Health Insurance
Babies and kids get sick. It’s just a fact, so if you don’t have health insurance you need to get some. If you already have health insurance, don’t procrastinate when you know you’ll have an addition to the family. According to smartaboutmoney.org, “If you are a new parent, notify your employer within 30 days of the birth of your child to ensure that the child is eligible for any dependent benefits.”
Life Insurance
As a parent, you want your family to be financially stable if you happen to pass away unexpectedly. You can do this by upping your life insurance coverage. If you work full time, many companies offer free policies to their employees. But if you have children, it’s a good idea to purchase additional coverage since policies offered through the employer rarely offer enough protection.
Life insurance has evolved over time, and many of the products that are offered have evolved. Example: Some policies now offer ‘living benefits’ with their policy. If you were diagnosed with a terminal, chronic, or a critical illness, you may be able to use part of your policy, while living. This could assist your family with medical expenses, living expenses, or even maybe help run a business you own.
Also, qualifying for life insurance has never been easier. People with Diabetes can qualify for life insurance coverage, at affordable rates. Also, no medical exam policies are avail be as well. If you don’t want to wait weeks, or months for an underwriting decision, you can apply for no medical exam plans, and receive a decision in a matter of minutes or days.
Consider buying a term life insurance policy. NerdWallet reports that term life insurance is “cheap, so most people who need coverage can buy enough to create a strong safety net.” Buy enough term life to cover the time period when you are spending money to raise your children, paying off debts and growing a savings account. Maybe you should consider taking out two policies, with different term lengths. This Laddering strategy allows you to take out coverage addressing your short, and long-term financial goals for life insurance.
Are you a stay-at-home parent while your spouse works outside the home? You need life insurance as well. If you pass away, your surviving spouse many needs help paying for child care, a housekeeper and other tasks you accomplished as a stay-at-home parent. Some studies have shown that a stay-at-home parent provides $50,000 to $100,000 in services per year. Could your family replace this without have a life insurance policy in place???
Short-Term and Long-term Disability
If you were to suffer a serious injury or debilitating illness, would you be able to continue supporting your family? Parents should consider purchasing a disability plan to help cover living expenses if they’re unable to work. Short-term disability plans protect you if you’re unable to work for six months or less. Long-term disability plans cover you throughout your entire disability period until you retire. When you’re responsible for supporting a family, purchasing a disability plan can help you avoid a financial disaster that might destroy your family’s way of life.
Save for College
Don’t wait until your child is in high school before worrying about college tuition. Start a college savings account when your child first enters this world. One smart option is a 529 savings plan, which provides both tax and financial aid benefits. There are two kinds of 529 plans. One of them is a prepaid tuition plan, while the other is a college savings plan. Most states in the U.S. offer at least one of these plans. As your deposited money grows in the plans, it’s tax-free as long as the money is used for college-related expenses.
Save for College or Retirement?
If you don’t have the means to save for both kids’ college tuition and your retirement, focus on building a retirement savings account. Your children can still go to college if you can’t foot the bill. Scholarships, government financial aid and loans are out there for kids who need help paying for higher education. But if you don’t save for your retirement, you’ll end up being a financial burden on your children as they struggle to help you make ends meet.
Save for a Rainy Day
Not only should you squirrel away money for your kids’ college education, but you should also save for a rainy day. Most of us know that emergencies arise in everyone’s life. The car breaks down, a spouse gets laid off from work or you’re slammed with some unexpected medical bills. These types of disasters can financially destroy your family if you’re not prepared. You could lose your home or your car. Your family will suffer, and you’ll feel powerless to remedy the situation. That’s why it’s so important to have an emergency fund to help keep the family afloat because of loss of income, sickness or some major event that requires a huge chunk of cash.
It’s best to have between three to six months of living expenses stashed in your emergency fund. Strive to set aside money from your paycheck each week to build your rainy-day savings. It may be as little as $25 a paycheck, but at least you will begin to grow a fund that can help during an unexpected crisis.
Children are expensive. From the moment they are placed in your arms until the day they graduate from college, you’ll constantly shell out money to keep them fed, clothed, sheltered, healthy, educated and happy. Prepare for those ever-present costs by creating a financial plan before the baby is born. If you follow these general tips to save and grow your money as well as protect your child’s future, you will find that taking care of financial matters may be a little less stressful.
