Financial Planning for Today’s Parents
Whether your child is a newborn or a teenager, you’re currently pregnant or planning for that someday, understanding how your present and future financial stability is something every parent must do. From buying the right life insurance to managing a household budget, finances are a necessary evil when it comes to parenthood. In the United States, it can cost more than $200,000 to raise just one child. That begs the question: Are you a financially prepared parent?
Buying (and Selling) Insurance
When you have kids, you need to have life insurance, but hopefully, you won’t need it for a long, long time. Nothing settles the mind of a parent quite like knowing their children will be cared for financially no matter what happens. Life insurance can help with lost income and funeral and medical expenses. The beauty of buying life insurance these days is that it can be done without leaving your home. Not only can you apply online, but you can also compare quotes and take advantage of online calculators to help you choose what type of coverage you need. Don’t be afraid to plan for the worst.
When it comes time to retire, you can always settle your policy to free up cash for emergencies or to help you enjoy your golden years. How much you’ll receive will depend on a number of factors, including the policy’s worth, your life expectancy, and the cost of premiums.
Creating a Budget
When you have a clear picture of your cash flow, the amount you have coming in versus the amount going out, you can be financially prepared for both the expected and unexpected. Start factoring in child-related costs, like daycare, food, vacations, school, and clothes, so you aren’t left fumbling when you learn that childcare can cost up to $10,000 annually.
Start by tracking your spending and determine what can be reduced or eliminated. While weekly and monthly budgeting is important, so is creating an annual budget. This lets you see how much you spend (and make any adjustments) on holidays, birthdays, vacations, summer camps, and other seasonal expenses.
When you have kids, the chances of urgent care, doctor, and emergency room visits increase, (though, in many cases, it’s more about the parents’ anxiety than the child’s health). Regardless of why you go, it’s important that you don’t have the added stress of wondering how you will pay. The same goes for unemployment. If you or your partner are unexpectedly laid off, or a sudden major expense arises — like purchasing a new car or home repair — you’ll want to have a strong savings to get you through those rough patches. Having an emergency savings fund that you can fall back on during these times is different than your regular savings. An emergency savings should be about three times your monthly income and only used in these dire situations. Don’t get this fund mixed up with your regular savings account, which can provide backup funds for vacations, minor household expenses, or extra school costs.
Understanding Health Insurance
If this is your first child, a lot will change with your health insurance. Before the baby is born you will need to understand how the little one will impact your premiums, deductibles and other healthcare expenses. If you participate in a Health Savings Account (HSA) or Flexible Spending Account (FSA), consider adding more each month to cover the additional costs that come with kids. Your child will also be hitting a lot of health and developmental milestones, especially in the first year. If you track these developments, you’ll be able to plan for times when you might need to pay for a specialist or have additional copays.
Financial planning for parents can seem intimidating. How do you know you’re making the right decisions? First, make sure you stay within the realm of reality — don’t go out of your budget or sacrifice necessities to start a college fund before your baby is even born. Most importantly, however, is to always keep the financial conversation open. Talk about your options and make decisions when they feel right for your family and your finances.
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About the Guest Author:
My name is Sara Bailey, and I’m a widow.
Like many people who have lost the love of their life, I never in a million years thought I’d be here. On my 40th birthday — which I spent with my husband and our two kids bowling, devouring cupcakes, and laughing more than I ever thought was possible — I never dreamed that by my 41st, I’d be a grieving single mom raising a son and daughter on her own. But here I am, and with each passing day, I get a little stronger, and life gets a little easier.
Read more at TheWidow.net