Being a parent means adjusting to a whole new way of handling your finances. You’re not just budgeting for yourself; now, there’s another human being in the household to think about!
Raising a child can be expensive. In fact, Talking Parents says that the average family will end up spending $233,610 from the birth of their child until they turn 18. But smart financial planning can definitely ease the burden.
If you recently became a parent, and you want to take steps to ensure that your family will be financially secure in the future, you might be wondering where to begin. Here are a few major financial considerations for new parents.
Buying a House
Renting with a new baby can be tough. If your neighbors are noisy, it can easily upset your baby, and if your apartment doesn’t have much room for a nursery, you’re probably all feeling a little cramped. You and your partner might be wondering if your growing family needs a home to call your own. And if the average monthly mortgage and property tax payments could be less than your rent, buying could help you save in the long run.
If you’re going to buy a home, your first step is to sit down and figure out how much house you can actually afford. Next, you and your partner should get pre-approved for a loan. Then, it’s time to connect with a reliable local real estate agent and start your search by checking out homes for sale online. Once you find a home, you’ll need to hire a home inspector to make sure the house doesn’t have any serious problems.
Start a College Fund
Sending your child to a four-year college can be pricey. The best way to prepare for these future costs is to start saving today. You can open a 529 savings account as a college fund and begin making regular deposits. When your child starts applying for colleges, you’ll be thankful for this extra savings account! Parents should simply focus on choosing a plan with low costs to get the best return on their investments.
Making contributions to a 529 college fund will result in tax benefits. To fully understand any other tax credits or deductions you may qualify for as a new parent, like the child and dependent care credit or the child tax credit, you might want to sit down with a personal accountant.
Consider Burial Insurance
You might feel a little morbid thinking about your own funeral, but as a new parent, keep in mind that planning for the day when you pass away will actually take a huge burden off of your children in the future.
You may want to consider purchasing burial insurance so that your loved ones will not struggle with funeral costs if you pass away without much warning. Funeral expenses can really add up, and paying for end-of-life costs can put serious pressure on your family’s finances. Begin your search by researching the average cost of funerals in your area. Be sure to shop around to get the best rates and ensure that your funeral costs will be covered.
Write Your Will
If you don’t already have a will written up, now is the time to do it. No new parent wants to think about their child having to go on without them in the event of an unexpected accident or illness. But knowing exactly how your assets will be divided up in this scenario can bring you peace of mind. If the worst happens, your child will be taken care of.
Technically, you do not need a lawyer to write a will. However, working with an estate planning lawyer can help you ensure that you’re not missing any important details.
As a new parent, it’s easy to think short-term. After all, you already have a lot on your plate, and life with a baby can be unpredictable. Sometimes, future financial concerns fall by the wayside. But when it comes to the family finances, planning for the long term is the key to setting your child up for a successful adulthood.
