Having a child inherently means planning for their financial future as well as your own. You need to have a good idea of what to plan for and what financial considerations to make. Taking the right steps early is an important aspect of being financially secure down the road.
Although you may already have life insurance, you should ensure you have adequate coverage once you have children (and if you don’t already have it, you should definitely get it with children in the picture). The prices for your life insurance policy will depend on which policy you select and the amount of coverage you choose. Also, consider getting disability insurance coverage to be sure your children could survive financially if you or your spouse couldn’t work due to a disability.
In order to successfully retire and meet other future financial goals, you need to set aside a percentage of your gross income every month. According to CNN, many financial planners recommend that you start saving in your 20s and set aside 10 to 15 percent of your income. Of course, the exact amount depends on what age you start saving and your income, and that amount can fluctuate, so update the amount every year.
Having a will is important if you have assets, but it’s even more important once children are added to the mix. A will determines who receives your assets when you pass and, more importantly, is also the only way to legally appoint a guardian for your children. Otherwise, the courts will decide who gains your assets — like your home and your financial accounts — and receives guardianship over your children.
The cost of having a baby will depend on your specific health care plan’s deductible and out-of-pocket expenses; you could pay less than $5,000 or more than $12,000. Whatever the price tag, you need to be financially prepared for the hospital bill. When budgeting for a baby, consider that the USDA estimates a middle-income family of four will spend approximately $12,980 annually per child. This factors in diapers, clothes, baby gear, toys, and more. Because the Department of Labor determined that only 12 percent of private sector workers receive paid family leave through their jobs in the US, be sure to factor in the potential salary loss from you and/or your spouse missing work for the arrival of your baby.
Furthermore, you may need to provide child care for your baby if you and/or your spouse return to your careers. The Economic Policy Institute says, “Child care is one of the biggest expenses families face.” The exact cost will vary on your state. For example, in California, the average annual cost is $13,154, and in Florida, it’s $8,694.
In 2016, the CollegeBoard estimated that the average tuition at a public four-year, in-state university was $9,650. If a student lived on campus and factored in books, the cost of college was between $30,490 and $32,940 for the year. When deciding where to save for your child’s college fund, most financial experts agree that a 529 plan is the best option. The IRS states that a 529 plan is “a plan operated by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training for a designated beneficiary, such as a child or grandchild.” It allows you as the parent to retain control of the account (as opposed to your child eventually gaining control), and it is tax-free. Also, many states offer a tax incentive if you contribute to a 529 plan.
Get More Information