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Financial Planning Basics Every New Parent Needs
Sunday, February 2, 2020

One thing that all parents can agree on is that having kids come with all sorts of surprises. When it comes to your finances, those surprises can cause you some serious stress if you’re not properly prepared. Unexpected home maintenance, family illnesses, or unplanned purchases can all throw your family’s finances out of whack, but a little financial planning can prevent these money mishaps. To get started, you just need to take some basic steps. So, whether you are expecting a new baby or currently raising your first child, make sure you have these tools in place ASAP to keep your family’s financial future protected. Life Insurance and an Estate Plan Thinking about having your worst fears come true can be difficult, especially as a parent. But if you want to ensure that your children are properly protected no matter what happens to you, thinking about those worst-case scenarios is essential. This is why 20-year life insurance may be the perfect financial step for keeping the lives of your little ones stable should you or your partner pass away unexpectedly. Because most parents expect to financially support their children until at least college, or early adulthood, and a 20-year life insurance policy can provide that monetary support no matter what. So, even if you already have a toddler, you know he/she will be able to afford college or any other major milestone, even if you are not around to share in that moment. In addition to the right life insurance policy, new parents should also invest time and effort into creating an estate plan. Setting up a trust, rather than just a will, can provide immediate peace of mind for you and your partner and financial stability for your entire family. Savings for Family Emergencies Planning for less-severe family emergencies is also important for new parents. For instance, if you currently own a home or plan on buying one soon, a home maintenance fund may be a savvy financial planning step. You should plan on saving up to 2 percent of your home’s value in this savings account so that you will have more financial resources if an emergency home repair pops up in your family’s future. If you currently cannot afford a $500 emergency, without putting a strain on the rest of your finances, then you need to start putting money away into your general emergency fund can also prevent other unexpected costs from derailing your budget. Setting aside up to six months’ worth of expenses can provide a financial cushion for your family in the event of a sudden financial upset, such as the loss of a job or a major medical emergency. These can seem like unattainable financial goals for cash-strapped new parents but making simple daily choices, like bringing lunch to work, really can help savings add up quickly. Practical Family Budgeting Tools Making life insurance payments and setting up savings can provide some crucial safety-nets for your family, but proper budgeting is needed to achieve these basic financial goals. There are many ways you and your family can save and still live well. If you feel a bit anxious about creating and sticking to a family budget, though, know you’re not alone. Hearing the word “budget” produces the same psychological response as the term “diet,” where folks instantly begin to think about suffering and deprivation, rather than reaching their end-goals. Before you sit down to work on your family’s budget, try to focus your efforts on achieving your financial goals, rather than thinking about the things you will miss out on by sticking to your new budget. You can also make budgeting easier by using an app to create your financial goals and keep your spending on the right track. Long-Term Goals Once you’ve set up your budget, you can start saving up for buying a home if you don’t currently own one. Purchasing a home is often a profitable investment because home prices tend to appreciate over time. If you’re buying your first home, an FHA home loan may be your best option. FHA loans have less stringent qualification requirements, and if you’re eligible, you may only have to put 3.5 percent down. At some point, you may wish to switch from an so you won’t have to pay mortgage insurance. When you’re dealing with mommy-brain or just dealing with the stresses of being a parent, thinking about money can feel like an added burden. Putting some basic financial safety-nets in place, however, can be a simple way to provide your children with the stability needed to grow into happy, healthy adults. So, before you take any other steps to protect your new family, be sure to spend some time creating a basic financial plan to give yourself some peace of mind. Back