Money management is an often-overlooked aspect of family planning. If you are expecting a baby or moving into a bigger home with your family of three or four, now is the right time to discuss financial matters with your partner. Adding a new family member certainly brings a lot of joy and excitement, but also responsibilities and expenses.
Whether you’re a new parent, getting married soon, or welcoming another child, feelings of overwhelm and financial stress are bound to occur. To avoid those feelings overpowering your excitement and happiness, consider these six financial tips as you prepare for a new chapter in your life.
- Review your household budget
A child has a lot of needs – healthcare, food, and clothing. While your priority as a new parent would be to provide the best for your child, you must consider affordability. This includes tracking your income and expenses early on. Whether or not you have a family to look after, make it a habit to track your spending habits monthly. Specifically, during the first few years, parents have to spend on healthcare, food supplies, and diapers. Though many parents buy insurance plans early on, you can get fast personal loans by Nectar to finance immediate expenses for your growing family’s needs.
To start budgeting, review your household expenses and needs. Are there any subscriptions or services that only drain your pockets and need to be canceled? What percentage of your current income goes towards paying for utilities and groceries? With a new family member coming along, you may have to spend money on a range of supplies like new clothes, car seats, cribs, toys, strollers, and diapers. Make sure there is room within your current budget to allocate funds for such expenses. Cut out expenses from your budget that offer no value or have cheaper alternatives.
- Set up a savings account
Setting aside money for your child during infancy is one of the best decisions you can make as a parent. The early years and then their teenage would pass by so quickly. The next thing you know, your child is in college. Tuition is costly, and it’s not easy to pay for every child’s education, especially if you’re the sole breadwinner of the house.
To avoid struggling to pay for your child’s tuition, consider setting up a savings account a few years before it’s time for your child to enroll in college. Then, you can save little by little every month or year to have funds available once your child is mature enough to make their own decisions or wants to go to college. It’s also convenient to set up a separate account for your child so that the funds for their needs don’t mix up with other expenses. For example, you can set up a 529 account which is popular for locking money for educational needs.
- Create an emergency fund
Similar to a savings account, you can also set up an emergency fund for precautionary expenses. A sudden surgery, medical injury, or lay-off doesn’t come with a warning. However, the impact of such financial setbacks can be mitigated if you have an emergency fund. You may first have to assess your monthly budget to build an emergency fund. Financial experts suggest basing an emergency funds account on your monthly budget.
Accumulate enough savings in your emergency fund to sustain you through at least three to four months of unemployment or financial hurdle. When you have funds stocked up for a couple of months, you’re free from the worries of paying for essentials like utilities, groceries, and rent. In addition, an emergency fund is crucial when taking time off work due to health issues or looking for new job opportunities.
- Plan for parental leave
The Department of Labor allows workers to take an unpaid leave of twelve weeks to look after newborn or ailing family members. Though that’s a general law, your state or the corporation you work for may have different rules regarding paid or unpaid parental leave. For example, if you’re an expecting mother, you might be allowed to take a more extended break. However, most corporations now give fathers extended or unpaid parental leaves.
Before the arrival of your new baby, discuss with your partner how much time both of you can allocate to care for your newborn. If you both can take long leaves without getting paid for those, you may have to look for other ways to finance your household budget. Unpaid leave for both parents may also affect your savings or emergency funds, so plan accordingly. Since childbirth differs for every mother, the extent of leave may also vary. Factor the possibility of an extended leave into your financial planning. It may be better to transition to a single-income household for some time instead of both parents taking breaks.
- Buy insurance
Insurance is a good option when planning on growing your family. It also helps counteract the impact of sudden medical expenses through accidental coverage. However, specifically for growing families, we recommend buying health insurance early on. Primary hospital care during childbirth and early visits to the pediatrician can quickly drain your savings.
However, with a health insurance plan for your child, you can cut back on costs considerably. In some cases, the insurance premium is relatively cheaper if you include a child early in your plan.
- Save for retirement
Though not directly linked with the needs of a new child’s arrival, you must start saving for retirement early on. Discuss with your partner how you two would like to spend your retirement period. Do you want to move into a smaller house, different than your current neighborhood or city? Or do you want to set aside funds for recreation after you both retire? The onus is on you and your partner to plan your retirement, but start setting aside funds early on.
Also, ensure to add healthcare and precautionary funds within your retirement plan to not burden your children when the time comes. The earlier you start saving, the more prepared and financially at ease you will be when you retire.
Conclusion
Financial planning is a crucial part of family planning. You must set aside funds for education and retirement from financing day-to-day expenses like groceries, rent, and healthcare. Family planning is overwhelming and time-consuming, especially when building a career. Managing your finances as you welcome a new member into your family allows you to be free from financial worries and focus on spending quality family time.
