03 Jul Financial Planning Before Having Children
If you have just gotten married or just graduated from college, your mindset may be on paying down your loans as your final financial goal. While becoming debt free is always admirable, there may be other expensive life changes just ahead.
Planning a family may just be a trendy phrase, but there’s plenty of truth in the “planning” part of it. Getting ready for children to join your family means more than decorating the nursery. Kids aren’t cheap. An average middle-income family could spend more than $245,000 raising a child from birth to age 18, not including college costs. And that’s just for one child!
So how do you prepare for that when you are just getting started? These tips can give you an idea!
What’s the Outlook?
Before any little ones come along, take a look ahead. Start before the children come along by making a budget. Look at a budget for your current expenditures and see what can be trimmed. Make new accounts for child care expenses such as diapers, daycare, food, and entertainment. Remember your holiday budget will need to increase.
One area you will not want to cut is savings. Try to move around your expenses so that you are still saving as much or more as you are currently. Your future self (and family) will thank you.
What’s the Plan?
Next, think about what you have to bring to the budget. Will your household have one or two salaries coming in? Will you or your spouse be staying home with your little ones? If so, you may want to check your employer’s policy on FMLA (Family and Medical Leave Act.) They may cover your absence for several weeks or months at full or part salary.
Also, if the parent leaving work is the one whose job had the health benefits, you’ll need to look into another way to get them. If both parents are planning to continue working, your budget will need to account for childcare costs.
Remember when you are creating your budget that your lifestyle may be changing. Some of things you might be used to doing as a couple, such as eating out or vacationing extravagantly, may need some tweaking.
Now that you have a plan, you must prepare for any wrenches that get thrown into your plan. Take care of the big things down the road early, so they don’t hit you at a time you can’t bear thinking about it. Before the arrival of children is the ideal time to have a will drawn up and to invest in life insurance.
Prepare for the possibility of job loss by putting away a little each paycheck. Ideally, you should build a savings that can hold the family afloat for three to six months, or until a new job comes along.
What Can I Do for College?
The tuition prices for college have been soaring in the last few decades. If you expect your kids to take the college route, you may need to prepare to help them financially. Fortunately, this can be as easy today as linking credit cards to a savings plan, with programs like Upromise. Set up a 529 plan for each child, which is a tax-free, government savings plan, and add to it whenever you can. When children are little and don’t care about presents as much, ask relatives to contribute instead to the college fund.
Building a family is an exciting time. Keep it happy by planning ahead so you and your family can enjoy a solid financial future. We’re always here to help, so give us a call when you’re ready to get started.