Bringing a child into the world means dealing with new financial concerns. Every parent wants to give their child a happy, secure life, and in order to do this, you need to brush up on your personal finance skills.
Thankfully, you do not need to be wealthy to give your child everything they need. But you do need to be proactive about saving, investing, and reducing your spending. Courtesy of My Life After Baby, here are a few personal finance strategies that every parent should utilize as they save and plan for their child’s future.
No parent wants to think about passing away and leaving their child behind, but every parent should establish a solid estate plan for this day well before it happens. According to Magnify Money, you need to write up your will and name beneficiaries. You should also decide who would become your child’s legal guardian.
You should also strongly consider taking out a term life insurance policy. Your plan can cover a variety of expenses for your family, including missing income, bills, funeral arrangements, and even college tuition. As a parent, you may want to consider a 20-year policy that will cover you until your child is an adult. Knowing that your child will be taken care of even after you’re gone can give you peace of mind.
Choose the Right Health Insurance Plan
If you’re a new parent, it’s time to go over the fine print of your health insurance policy and make sure that your coverage will account for your family’s needs. You have likely already added your child to your policy, but if you recently gave birth and haven’t done so yet, now is the time!
Worried about covering certain healthcare expenses? Look into organizations and clinics in your community that help provide children’s healthcare at lower costs or with a sliding scale for prices.
Tighten Your Budget
As parents, you and your partner will need to carefully monitor your spending to ensure that you can cover childcare and unexpected expenses. Creating a strict budget is essential.
Find areas where you can save, and make sure that you have money left over at the end of each month to save or invest. Childcare can be pricey, so it will probably account for a large portion of your spending. See if you can reduce certain monthly payments. For example, you could switch to a cheaper phone plan or drop unnecessary subscriptions.
Start a Side Business
A great way to boost your income is to start a side business in addition to your 9-5. The income you bring in from your side business can be used to put in your savings or put towards a college fund for your children. If setting up a business, though, be sure to take proper steps.
To start, form an LLC, which will help protect your personal assets and offers tax benefits. Using an online formation service like ZenBusiness makes this part of the process really easy.
You should also put in place methods for tracking your revenue and expenses. This will save you a lot of headaches when it’s time to pay taxes. And test different marketing strategies to get the word out about your business. When your marketing practices are humming, new clients or customers will flow in which will make running your side business a breeze.
Establish an Emergency Fund
Parents should contribute savings to an emergency fund to help pay for their child’s needs and maintain financial stability in the event of unemployment. According to Parents, you can begin by putting away about three to six months of living expenses, but if you can save up to a year’s worth of expenses, you will be in even better shape. It can be tempting to spend this money on something fun instead, but the first time you need to dip into your emergency fund, you’ll be grateful that you didn’t!
Save for College
It is never too early to start saving for your child’s college education! Earning a four-year degree can be very expensive, so saving now will help your child avoid the burden of student loans in the future.
The easiest way to save for college is by investing in a 529 college savings plan. Your earnings will grow tax-free, and withdrawals used for qualified educational expenses will not be taxed, either. In addition, you enjoy tax deductions for contributions in certain states. These tax-advantaged accounts provide plenty of benefits to parents who are saving for their child’s education.
Having children can give you an entirely new perspective on life. Now, you need to plan and save with bigger goals in mind. Whether you have a newborn, a preschooler, or a teenager, it is never too late to fix up your finances and set them on track for a brighter future.
Carrie Spencer created The Spencers Adventures to share her family’s homesteading adventures. On the site, she shares tips on living self-sufficiently, fruit and vegetable gardening, parenting, conservation, and more. She and her wife have 3 kids, 2 dogs, 4 cats, 3 goats, 32 chickens, and a whole bunch of bees. Their goal is to live as self-sufficiently and environmentally-consciously as possible.