Having a child changes your life in several ways, especially when it comes to planning for the future. Part of adjusting to life as a new parent involves getting your finances in order. While financial planning may not be on your list of immediate priorities after the birth of your child, having money conversations with your spouse and starting up a realistic financial plan is essential for minimizing stress and ensuring your family is set up for success. Here are some smart financial moves every new parent should make.
Do you need more space for your growing family? This may be a good time to start thinking about buying a home of your own. Homeownership comes with some big financial benefits, from increasing your net worth to reducing your future living expenses. Plus, your property will be a valuable and sentimental asset to pass onto your children one day!
Buying a home is a huge financial decision. If you’re a first-time homebuyer, make sure you do plenty of research into the homebuying process, so you understand the specific steps involved. For example, homebuyers often start by estimating what they can afford, getting pre-approved for a loan, and searching for potential homes online. If you’re not ready to buy a home just yet, come up with a saving plan to accumulate enough for a down payment within your ideal timeframe.
Once someone relies on you financially, it’s time to start thinking seriously about life insurance. Life insurance will protect your family if something should happen to you. Mom and Dad Money recommends that even stay-at-home parents get life insurance since replacing the everyday childcare and housework tasks of a stay-at-home parent can be very expensive for the working spouse.
While you’re thinking about life insurance, consider long-term disability insurance as well. The purpose of long-term disability insurance is to cover your lost income if you become sick or injured and can no longer work. Having this kind of insurance coverage can bring you and your family some invaluable peace of mind.
While you probably have all kinds of savings goals now that there’s a child in your life, try to build up an emergency fund first and foremost. This emergency fund is meant to be used to cover large, unexpected expenses, like a major home repair or a medical bill. You can also dip into your emergency savings if you lose your job or an illness threatens your ability to work.
Importantly, make sure you keep this money in a simple savings account. MoneyCrashers recommends thinking of an emergency fund as another kind of insurance policy rather than an investment. Stash your emergency money in a savings account that provides high enough returns to keep up with inflation, but don’t lock it away or use it to invest. You need to be able to access this money as quickly as possible in an emergency.
When you have children, it can be very tempting to start squirreling money away for your kids’ future college education. However, financial experts recommend saving for your retirement first. When you quit working, your retirement savings will be your only source of income to pay for food, housing, and all of those other living essentials. On the other hand, your children will have access to various funding options, such as scholarships and student loans, which can help them pay for college. They can also get part-time jobs or select more affordable places to go to school. College is a luxury. Having money for retirement is a necessity.
Planning for your financial future is one of the best gifts that you can give your children. Unfortunately, it never seems like the perfect time to sit down and review your savings goals or research your insurance options. But the earlier you start thinking about the future of your family, the better off you’ll be to meet your goals and handle the unexpected. The best time to get started with financial planning is right now, so don’t put it off another day!