The best time to get money-wise about parenthood should be before a child is born. Most soon-to-be parents are probably thinking about all the glorious elements of being a parent…the snuggling, the baby baths, the feeding, or changing diapers. The last thing newly minted parents are thinking about is making sure their family is setup for financial success. If you are a parent-to-be, preparing ahead of time will enable think through all your options and create a solid financial plan.
1. Create a (parent) budget
When a child arrives, your family budget will change dramatically. Make sure to factor in the cost of diapers, baby formula, child-care, clothes, toys and the list goes on.
2. Start an emergency fund
Start saving three to six months of household expenses in an account that you can readily access. For those who wish to be a bit more aggressive, aim for six to twelve months.
3. Review your insurance coverage
The primary goal is to make sure your family can continue to keep the household going financially if something unexpected were to happen. This will involve conducting a thorough analysis of your life insurance, along with short- and long- term disability insurance.
4. Think retirement before college
Students have options for funding their education…grants, scholarships, loans and any savings or investments you’ve put aside. You don’t have such a variety of options to fund your retirement, nor can you make up for that time lost. It’s understandable that you want to provide proper funding for your child’s education, but your own financial independence should be the top priority.
5. Make an estate plan
Make sure your family’s wishes are carried out in the event something happens to you. Your family’s details will end up in court with a judge deciding what he or she thinks is best if you don’t have documents such as a will, trust or power of attorney.
Please make sure to speak with a financial professional as it relates to these tips. Doing so will ensure that you and your family will have peace of mind as it relates to your financial decision making.