Financial planning is an important topic to discuss as parents, and while it can be overwhelming to consider, it doesn’t have to be. If you break it up into smaller chunks, rather than trying to tackle everything at once, you’re more likely to meet your goals. Start small and then work your way to larger concepts. Here are a few things to consider as you think about financial planning as parents.
Can You Live on One Salary?
If you are a dual-income couple, a baby on the way means it’s a good time to consider becoming a one-salary family by having one parent stay home with the baby. Take a look at your income and your budget to see if you have the room to make this work. You’ll avoid the expense of child care, but you’ll obviously have less money coming in. Whether or not you have to pay for child care, you’ll also have many other baby-related expenses – diapers, clothes, etc. If one parent does decide to stay home, it doesn’t mean their income has to be zero. There are plenty of side gigs out there that will let you earn good money part-time.
Increase your Savings
With a baby on the way, now is the time to boost your savings. While a good recommendation is at least three months’ worth of expenses in savings, children always bring unexpected expenditures, so it’s a good idea to build that account as much as possible. If you decide you can live on one income when the baby arrives, why not start now? You can drop the extra money into your savings account each month until the baby arrives, and you’ll feel better about having extra money set aside.
Get Life Insurance
Growing a family means having more people dependent on you, which means making sure they will be taken care of if you were to die unexpectedly. Life insurance provides coverage for lost income and any funeral or medical expenses, making it an ideal choice for young families. The good news is that life insurance is relatively cheap if you’re young and healthy. Before you buy life insurance, make sure you understand the different types of policies (such as term coverage versus whole life coverage) and how cash values and premiums can vary from policy to policy. These days you can conveniently take advantage of the ability to shop online for a life insurance policy and compare rates using an online calculator. This is one task that can be easily completed in a few hours on a weekend afternoon.
Start a College Savings Account
If you are about to have a baby, this is the perfect time to start saving for college for your child. Depending on your financial situation, this may not be an option for you yet, but any amount you can save will be helpful. Do some research on 529 college savings plans, Roth IRAs and even prepaid college tuition plans. Pick the best one for you and start saving. Even if you can’t save now, don’t despair. There are lots of college scholarships and grant programs, and your student can always work to help put themselves through college.
Following the tips above will give you a good start toward financial planning as parents. Don’t stress, start small and be sure to communicate with your partner. With the financial side in order, you can keep your focus on your kids, which is exactly where it needs to be.
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