Kids cost a lot of money, so what’s the best way for a parent to manage? Even the most financially savvy people can find themselves at sea when becoming new parents. By taking an organized, thoughtful approach, however, you can tackle this next step with confidence.
Redefine Your Budget and Goals
A child changes how much you’ll spend each month. This means, even if you’ve already been following a budget, it’s time to reevaluate your spending. You may need to cut back on your entertainment or going out budget to make room for necessities like food, diapers, and clothes for your new arrival.
An often overlooked expense is vehicle insurance. Based on your coverage, age, and even location, you might be able to change your provider to save some serious cash. Check around for insurers that provide discounts for bundled services (home and auto). If you live in a more-expensive-to-insure ZIP code, you can still likely lower your rates without reducing your coverage.
You should also consider taking a look at your savings goals. There are several new reasons to set money aside that you may not have considered before parenthood. Make sure you save enough to provide the kind of future you want for yourself and your family.
If you want to travel, for example, keep in mind that vacations don’t come cheap. It costs an average of $1,145 per person, per trip. A single excursion for a family of four can easily exceed $4,500.
Research your local school system to get a sense of what kind of educational expenses you’ll face throughout your child’s life. If you live in a lackluster school district, you may want to start saving now for private education. Even if your school district has a great school, you will still need to make sure you’re setting aside money each year for school supplies, field trips, class fees and other education expenses.
Moreover, you should consider setting up a college fund so your child will have money set aside for pursuing higher education. Each state has its own college fund, but you aren’t limited to your own state’s program. Compare the pros and cons of all the options available to you, and pick the one that’s best suited for your family.
Remember, not all children qualify for scholarships so the more you save now, the better. If your kids do wind up with financial assistance, the money you’ve saved can help cushion their post-college life or even pad your retirement.
Planning Your Estate
It can be difficult to imagine your family going on without you, but that’s precisely why estate planning is so important. By making sure you have a solid will and investing in life insurance, you can make sure your family will be able to manage if you were to pass away. Moreover, getting estate planning started now will make the process of updating your will much easier when you’re older.
Contact an experienced estate lawyer and go over your plans for the future with them. Make sure you’ve selected appropriate guardians for your children, and determine how your money will be distributed.
You should also consider taking out a life insurance policy sooner rather than later. Many people wait until they’re older to take this kind of policy out, but that’s often a mistake – policies lock in rates for up to 30 years, and the younger you are when you take it out, the lower that rate will be. Before you start shopping around, use an online calculator or talk to a local agent to get a sense of the type of coverage you should expect to see.
Involve the Whole Family
As your child gets older, try to find age-appropriate ways for them to learn about money, too. Sadly, many schools teach minimal, if any, financial planning advice, but that is one of the most valuable lessons for young learners. However, if you involve your child in financial planning at home, you give them a hands-on way to learn how to manage money. This will put them in a good position for the rest of their lives.
For example, once your child has the math skills, consider having them help plan a budget for a family vacation. They can figure out how much you should spend each day, and plan a few outings that fit within your daily budget. Give them a hand if they need it – you’ll be helping reinforce their math skills while teaching them about how to make wise financial choices in the future.
For parents, financial planning is a matter of balancing the day-to-day with making the future as bright for your child as possible. By keeping your eye on the horizon, you can make wise money choices for your whole family.
About the author: Sara Bailey is a mother, widow, and the creative mind behind The Widow. On her site she writes inspirational pieces to help other widows and widowers find beauty in joy in life, no matter what.
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