Having children means you should be prepared financially to pay their family costs. Either you can financially pay for your children’s upkeep or decide to end up childless. Having a home is considered the biggest investment most of us will make and raising children adds to the costs. Before having children parents consider many factors that affect their financial situation. That is why financial planning is recommended so parents will be prepared for future family expenses.
An additional child can add a little stress so proper financial planning will help reduce this stress. Here are 5 Financial Planning tips for your children.
1. Calculate expenses and start saving – Child rearing will surely affect your budget. Assess your financial situation to see to if you can afford it. Also take note of your family expenses and your goals for your child. It is also important to start saving as early as possible as the expenses will surely go up as the child grows older.
2. Make budgeting a hobby and always consider funds for unexpected events – It is recommended to create a monthly budget that includes all your expenses for your children. To help you start up with a number for estimates there is a calculator at BabyCenter.com where you can compute expenses according to the needs of your child. Since not every financial event is in your control always have a backup plan for unexpected financial expenses. One example is the sudden increase of health-insurance or expenses when your child gets ill. Always consider all inevitable factors in financial planning.
3. Get some Life Insurance – For financial stability, parents should always consider getting a life insurance plan. You should have finished step 1 and 2 to determine how much of the insurance you need as the estimates will be a good basis of it. Life insurance is a recommended part of long term financial planning
4. Get a Social Security Number as soon as possible. – The hospital usually takes care of this for your new child but it is not automatic that all hospitals will do it. It is important for parents to ask for this information by the hospital. A social security number is required if you want to open a savings account for your child. The longer it takes for you to get one the longer it takes for you to begin their savings account..
5. Learn to prioritize between college savings and your retirement savings – Time flies fast and as soon as you know it your little child will have grown to go to college. Begin a savings plan for college as soon as you are able. Balancing between the need for retirement and college savings is challenging but it will surely pay off. The Roth Individual Retirement Account (IRA) is one method where you can save for both college and retirement.
There are other ways plans to help on your financial planning. Following this 5 steps guideline may be hard but it will surely pay off in the future for your family.