As a parent, your main concern is the health, happiness, and well-being of your child. Much of that is up to the way you raise and love them, but there is no denying that supporting a child is expensive. As of 2017, the average cost of raising a child to the age of 17 was $266,610. That doesn’t take into consideration parents who choose to support their children through university and in the first few years of their adult lives.
The only way to make sure you are able to afford these costs is to develop a solid financial plan. Here are the basics you should look at to get you started.
Only about one-third of Americans maintain a formal budget, and yet careful budgeting is an essential part of being a financially responsible parent. Before you start looking into savings accounts and insurance, you need to know what your costs are and what your expenses are likely to be as your child grows older or you have more kids.
Start by making a comprehensive list of all your expenses in a year. Include all bills, food, leisure, holidays, and large annual expenses like Christmas and back-to-school shopping. Once you have it all laid out, you will be able to see where you can cut corners and start diverting money into a savings account.
Be Smart About Savings
You have a few options when it comes to savings, so it is worth familiarizing yourself with the different types of savings accounts available to you first. It is recommended that you maintain a few savings accounts instead of pooling everything into one place. For example, keep an emergency fund separate from a college fund.
Comparing savings accounts can be confusing, so it helps to remember what you are looking for. The best savings accounts have low monthly fees (or none at all), high interest rates (the average is 0.01 percent), and generous withdrawal and deposit limits.
Get Life Insurance
If you don’t have life insurance yet, it’s time to do so. The earlier you do, it the better, as life insurance tends to be cheaper the younger you start. Before buying, make sure you fully understand the different types of policies, as well as how the cash values and premiums vary. This comprehensive guide by The Simple Dollar is a good place to start.
CNN Money recommends calculating how much life insurance you should have by adding any current and projected debt to an estimate of how much money your family will need in the case of your passing and then subtracting any assets you currently have (e.g.: savings).
One thing people often forget is that in a situation where one parent works while the other stays at home, it is not just the one with a job who needs to be insured. You need to consider the costs of replacing the housekeeping and child-rearing labor done by the other parent.
Remember that you always have the option of selling your life insurance in retirement, this is called a life settlement. Selling a life insurance policy can free up some cash when you need it later in life, whether it’s to help enjoy your retirement or to pay for end-of-life care.
Whether you are already a parent or are expecting your first child, it is never too soon to start planning for your family’s financial future. Take the time to inform yourself about your options, and ask friends and family about how they have dealt with financial planning — they may have some good advice. Facing the costs of child-rearing head-on can be intimidating and scary, but it is the best way to ensure a safe and secure future for your child.
Sara Baily, author of www.thewidow.net, is a widow and mother of two. She knows from experience how important it is for parents to have a strong financial plan. Flowers Insurance Agency thanks her for sharing her wisdom and for her passion to help other parents.
Please let us know if we can help your family in any way. If you want someone who will sit down with you, and explain the details you need to know, call us today at (512) 710-2185 or schedule an insurance review.