Essential Financial Planning Tips for Parents

Being a parent comes with a number of responsibilities, but making sure your family is in good financial standing is high up on the list. So, let’s discuss some of the things parents need to bear in mind when it comes to financial planning.

The Basics of Financial Planning

Financial planning is a process that helps you determine your current situation while deciding what you need to put in place to meet your short-term and long-term goals. For a successful financial plan, you’ll need to accurately deduce your assets and liabilities as well as set realistic goals. It’s also a good idea to look into creating a proper will so you can dictate how your assets are handled as well as designate a guardian for your minor children. While it’s possible to develop a financial plan on your own, you may need a certified financial planner if your financial situation seems complicated. According to the Balance, there are certain steps you should take before selecting a financial planner. These include writing down your financial goals and interviewing several planners to ensure you choose the right person for you.

Getting an Early Start

Ideally, you’d start thinking about financial planning before your child is born. This would allow you to include the funds necessary for meeting your new baby’s needs in your planning. Your baby will not only need clothing and other supplies, but you may also need to modify the house to make sure there’s enough space. This article by Discover goes into great detail about the costs associated with raising a child. Until the age of 5, you may spend as much as $12,680 per year to meet your child’s needs. This increases to $13,900 per year between the ages of six and seventeen. Above the age of 18, college tuition becomes your main concern and this can cost as much as $35,370 if your child needs to study out-of-state. Fortunately, knowing these figures early gives you an advantage. Don’t forget to look into your eligibility for tax credits.

Recommended Insurance Policies

When it comes to parents, there are three things that financial planners are likely to recommend. These are adding your child to your health insurance, getting disability insurance, and getting term life insurance. In this article from Bankrate, new parents are encouraged to make contact with their health insurance providers to formally inform them of the new baby. You would then be guided in the steps required for adding your baby to your existing policy or upgrading to a better one if there are more benefits. While some employers may provide liability insurance, this policy will not help you if you weren’t hurt at work. That’s why it’s best to get your own disability insurance that will replace lost wages while you’re unable to work.

Term life insurance is a specific kind of life insurance that lasts for a maximum of 30 years and offers a significant cash benefit to your beneficiaries after your passing. Most importantly, these policies tend to be more affordable than other types of life insurance and have a level option that keeps your monthly premium set without affecting the death benefit figure. Make sure to determine which insurance rates are best for your current financial situation.

Establish Savings Accounts

As mentioned, college can be expensive. Fortunately, there are ways you can prepare for this expense. There are scholarships and grants that are available to students, some of which are government-based while others are from private organizations. You’ll need to research the ones that will be most applicable for your child. If you’re getting started early enough though, college savings accounts can be a life-saver when the time comes. These plans are offered state-wide and accumulate savings geared specifically towards financing your child’s college education. The costs and benefits may vary so ensure you’re comfortable with the one you’ve chosen.

Another major expense is homeownership. If you’d like to purchase a home, you’ll need to save up for a down payment and make sure you’re taking in enough income to afford your monthly mortgage payments. Many lenders now accept down payments well under 20 percent. For example, if you’re eligible, VA loans don’t require a down payment, and some conventional loans require only five percent down. 

While this article provides some good information for parents who need financial planning advice, it’s essential that you take the steps that are best suited for your life. Having a great strategy today will mean you’re well-prepared for the future.

- Sara Bailey, Guest Contributor from thewidow.net