Planning and Preparation: Financial Tips for Young Parents

Thanks to author Sara Bailey,  info@thewidow.com  for this timely blog. Planning is important for all ages.............Dennis

Planning and Preparation: Financial Tips for Young Parents
Raising children is an expensive proposition these days, and it just keeps getting costlier. There’s so much to plan for: daycare, braces, cars, insurance, college, and more. Careful planning is absolutely essential so you’re prepared at each stage. There are several things you can do to get the ball rolling when your children are young, decisions you can make that give you a head start as your kids grow older. Consider these financial ideas as you begin thinking about the future.

Who’s the Main Breadwinner?
If, like many young couples, you’d prefer that one of you stay home with the little one during the early years, take a careful look at your financial situation and determine whether you can afford to make it on one full-time salary. For a lot of people, it’s the only way to avoid the expense of daycare. Make a detailed budget, and consider whether one of you could generate a side income through a home-based gig. Don’t forget to factor in expenses like diapers, equipment, medical attention, and baby clothing, which can add up pretty quickly, before making a final decision.

Feed That Savings Account
The baby and toddler years are a good time to boost your emergency savings, which give you a financial cushion against the possibility of unexpected expenses. The car might need a new transmission, or a health emergency could leave you with a substantial out-of-pocket bill. The traditional formula is to raise at least three months worth of living expenses for an emergency, but be careful to factor in the new expenses you’ll incur as a parent. 
 
Daycare
Daycare is the 900-pound gorilla of childhood expenses for many American families. For those who can’t get by on one salary and don’t have someone who can babysit, you’re looking at several years of daycare costs. At full-time rates, the average cost of daycare is about $10,000 a year, which constitutes a major financial challenge for most young families. Do yourself a favor and set money aside as soon as possible to help defray this expense.

Healthcare Insurance
If you’re starting a family, you’ll need to take a different view of health insurance. The bare-bones coverage that many young people get by on won’t do the trick anymore now that you’re a parent. If you’re a full-time employee, you probably have the option to sign up for a family health plan, which will take more out of your paycheck. It costs more, but it’ll cover much of your increased healthcare needs and prescriptions. Also, don’t forget to factor in higher premiums when you’re budgeting.

Life Insurance
Now that you have a family, your need for life insurance has never been greater. Your dependents need the kind of financial safety net a life insurance policy can provide. Make sure you understand the types of policies, i.e. term versus long-term insurance, and how the cash values and premiums vary among them. One nice thing about a life insurance policy is that you can sell the policy during retirement to free up needed cash for emergencies or vacations.

College Fund
Saving for college on your own can be a tough task when you’re young and trying to make things work from week to week. Consider starting a 529 plan, which is a tax-advantaged savings plan designed to make it convenient to set money aside for your child’s college.
Financial planning can seem like a complicated and arcane subject when you’re young and inexperienced. A lot of it just comes down to planning ahead and saving for the future. That’s good financial advice for anyone, regardless of circumstance or age.

Written By: Sara Bailey :  info@thewidow.net
 
Image courtesy of Pixabay.com

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