Five Important Financial Considerations Every New Parent Should Make
The miracle of life is truly something to behold. Part of you wishes that you could just push everything aside and spend the next 18 years watching your child grow up, but unfortunately, time waits for no one. Right now is a pivotal moment that can define your family’s life moving forward. You need to be financially savvy in order to secure the futures of both you and your child.
Here are five considerations you have to make now that you’re a parent.
Invest in Life Insurance
No parent wants to think about not being there for their child, but planning for worst-case scenarios is critical. Every new parent should get life insurance if they don’t already have it. A life insurance policy will pay out a lump sum to your beneficiaries should you pass away unexpectedly, which can be a lifeline for paying off any debts you leave behind. Depending on your policy, you may also be able to borrow funds while you’re still living to pay for emergency expenses, such as a child’s medical bill. Do a little research to decide what type of policy will work best for you, and be sure to get quotes from a few different insurers to find your perfect plan.
Research Childcare Expenses
Before now, you probably have been used to a certain kind of lifestyle. You’ve grown to know what kinds of expenses to expect in your daily life, including how much you spend on food, housing, and medical needs. However, now that you have a child, your lifestyle is about to go through a radical transformation. Yes, you will be caring for another human being, but even framing it this way doesn’t capture the enormous financial responsibility that comes with raising a child.
If you haven’t been splashing out cash in order to buy a new crib, stroller, and car seat, then you should prepare to spend a pretty penny on getting your child all the necessities. Even if you are able to acquire these baby-care items for free, you still need to shell out for food, diapers, doctor visits, and nanny or daycare services. It can add up rather quickly, which is why you need to know exactly how much you’ll be spending for the next 18 to 20 years.
Take Stock of Your Current Financial Situation
The other part of the puzzle is knowing how much money you are bringing in with your current job. Take stock of the income that you and your partner are making, and weigh that against the expected costs for raising a child. Additionally, you should account for your assets, such as the value of your home and car. Once you add up your assets with your current combined income, you will have a better idea of how to handle the costs of raising a child.
If you’re still in the black when comparing your income vs. expenses, then you might consider making some changes to provide more for your child, such as one parent staying at home for a couple of years to raise them during their formative years. If you are in the red, you might consider picking up a side job or possibly selling your current car and leasing another, more family-friendly vehicle at a lower cost.
Pad Your Emergency Savings Account
You can’t prepare for every challenge that comes with being a parent, so the best move you can make is to plan for the unexpected. Everyone tells you how important it is to set up a savings account, and now that you’re a parent, you need to have some money set aside for unexpected costs. Set up an emergency savings account specifically for child-related expenses, and breathe a little easier knowing that if something crazy happens, you won’t be hurting financially.
Set Up a College Fund
In addition to setting up a savings account, you should also look into setting up a fund to help cover costs that will arise in the future. Putting a child through college is becoming increasingly expensive, and if you’re hoping that your child seeks higher education someday, then you should set aside some money in a fund to help pay off their future college expenses. Even if they decide to take a different path in life, this money can be a nice cushion to help them along after they leave home.
Watching your child grow into being their own person is one of the greatest joys you can experience in life. By taking care of these financial responsibilities ahead of time, you avoid having to worry too much about finances when raising your child.
Photo Credit: Pixabay.com
written by: Emily Graham