Guest post by Sara Bailey (Thewidow.net)
The addition of a child to your family is a joyous event. Whether it’s a newborn, an older child, or a teenager, children are expensive. So, it’s important that you make financial planning a top priority. Why? Kids always need stuff! Newborns require formula, baby bottles, and diapers. Kids constantly outgrow shoes and clothes. And teens need just about everything you can imagine! Now is the time to count those pennies, create a budget, and grow a savings account for your kids. Read on to determine the best way to get started.
Create a Budget
A report created by the US Department of Agriculture concluded that raising a child to age 17 costs close to $234,000. Realizing that parenting for the child’s first 17 years requires a chunk of cash, begin formulating a budget before your bundle of joy arrives. Your budget should factor in the cost of basic needs, including diapers, formula, clothing, shoes, car seats, mortgage, car payments, and a host of other necessary items.
Determine the Value of Your Assets
Calculating your net worth helps you understand the condition of your financial health. Net worth means the value of your assets minus your debts that you are trying to pay off (such as loans). When you understand your financial health, it provides a picture of what you need to do in order to improve your finances. Often this requires figuring out the value of your home so you can calculate how much your assets are worth.
Life and Disability Insurance
When you have children, you want to make sure they have enough money if you should ever become disabled or die. It’s not the happiest topic to think about, but purchasing life and disability insurance will provide you and your spouse with peace of mind. Life insurance can be a big help when it comes to lost income or paying for costly things like medical bills and funeral expenses. As difficult as this subject maybe, you don’t need to leave the house to buy life insurance. You can use a free online calculator to obtain an estimated rate, depending on how much coverage you’re looking for.
Buying disability insurance helps if you ever become unable to work because of a serious injury or illness. It can help cover the cost of childcare, school tuition, credit card debt, and a mortgage. Even if your employer provides you with disability insurance, you may want to purchase supplemental coverage to ensure that you have enough money to take care of all of your family’s necessities.
The price of college tuition continues to skyrocket, so even if your child is still in diapers, start saving for college now. Figure out how much you can save per month, then choose a savings plan, such as a 529 plan or Roth IRA. Regardless of which savings method you choose, if you have the financial ability to start a college fund now, it will ease the financial burden when your child goes off to college.
Emergencies are unexpected. Maybe your car breaks down or you have some sudden medical expenses. Or, maybe you or your spouse gets laid off. All of these life events can jeopardize your family’s financial stability if you don’t have some emergency money squirreled away for a rainy day. Begin saving whatever amount you can afford -- even if it’s just $25 a month. The goal is to have at least $1,000 in the fund in case the basement gets flooded or your elderly dog needs emergency surgery. Even better, strive to save three, six, or nine months of your salary to increase your financial cushion.
Having kids isn’t cheap. That’s why it’s crucial you create a budget, build your savings, purchase life and disability insurance, and save for your child’s future college expenses. Taking the time to work on financial planning will help you care for your family’s needs in the most efficient manner. It will provide you and your spouse with peace of mind, knowing that whatever life throws your way, you’re ready for it!