Becoming a parent is an overwhelming experience, especially when the enormity of your responsibility hits you full force. Even the most even-keeled parent has been known to wake up in the middle of the night with palpitations and shortness of breath. It’s good to be concerned, but panic isn’t necessary because a prepared and thoughtful consideration of your family’s financial future can help ensure you’re able to meet the financial challenges that come with raising a happy, healthy child. So, begin your plans early and get started right away.
Fill Your Emergency Coffers
Everyone needs a well-stocked rainy-day fund. Young couples often aren’t concerned with planning for the unexpected, but starting a family significantly increases the likelihood that unplanned expenses will crop up. Your first move should be to build up enough of an emergency fund to keep your family going in the event of income loss, emergency medical expenses, or if you have to replace an appliance. It’s always a hard thing to do, and it’s easy to let it slide, so consider having a percentage of each paycheck automatically deposited into a savings account. The traditional rule of thumb is to have at least three months’ worth of savings in the event of an emergency. Remember, a new baby means new bills, so start building that savings account before your new child arrives.
Who’s Working?
One of the most important decisions you’ll have to make is whether you and your spouse will both work after the little one arrives. Considering the high cost of daycare, many couples are cutting costs and making arrangements for one parent to stay at home with the baby. It’s worth it to figure out whether you can get by on one salary for a few years, or until a friend or relative becomes available to babysit during the day. Be careful in assessing your monthly budget to be certain there’s enough wiggle room to meet your financial obligations and have something left over. Bear in mind that you’ll need to figure out the value of your home when calculating how much your assets are worth.
Daycare
Finding a way to pay for daycare is the biggest challenge for parents during their child’s early years. A family with just one child pays an average of $11,666 a year. That’s a big bite for a young couple trying to plan for the future, swing a mortgage payment, and set money aside for unexpected expenses. Parents who aren’t lucky enough to have a family member who can babysit often are left with few options: make a career change or adjust work schedules so someone can be at home during the day, or start saving as far in advance as possible. The gig economy and the flexibility that computer technology provides have helped many beleaguered couples to explore at-home business ideas.
Health Care
Health care insurance is always a high priority for young families. If you’ve been getting by on a stripped-down health insurance plan at work, it’s time to step up your game and sign up for a family plan. Remember to factor in a higher deductible, copays, and a little less money in your pay every two weeks when budgeting. This is one area where you don’t want to cut corners; little ones have a tendency to pick up germs and get sick easily.
Parenthood is one of those milestones in life that force you to reconsider everything about your life. Your financial situation is one of the most important factors to reassess. You’ll need to save more money than ever before, prepare for expenses you couldn’t imagine just a few months ago, and prioritize things like health and life insurance.
Article by Sara Bailey at thewidow.net