Healthcare professionals claim that time is the more important parental investment for kids. But it can’t be denied that money is also a vital investment, particularly for a child’s academic future. As a parent, you surely want your child to go to college and make it as easy for them as possible.
Paying for college can be your biggest financial concern, which is why making smart money moves is essential. Planning for your kid’s financial future can even be more confusing and challenging when you’re a first-time parent. Don’t know where to start? Here’s how.
1. Create a household budget
Almost all kinds of financial goals start with creating a budget, especially preparing your child’s future. Having a new family member obviously means additional expenses such as diapers, baby clothes, and more food. According to the U.S. Department of Agriculture, households spend around an additional $12,000 to $20,000 every year for a child. In creating a new household budget, take note of the upfront costs and recurring expenses for the long term. Examples of one-time expenses include a car seat or a stroller, while recurring ones are toys or diapers.
2. Set up a college fund
Starting a college fund is certainly one of the toughest parts of preparing for your kid’s future. Still, this helps secure higher education for your kid and for peace of mind as well. You can begin by estimating college costs, from the tuition, board, to the room, to give you an idea of how much you need to save each month. You can then consider starting a 529 college savings plan to help you fund your kid’s education expenses. Plus, it also offers tax-free savings and withdrawals. However, be sure you have a thorough understanding of the financial aid options available to you, ensuring you’ll get the best for your kid’s educational needs.
3. Plan for your own retirement
Planning for your retirement is not solely for your own convenience and security, but it also allows you to free your child from any responsibility. Don’t forget about yourself too. There are tons of ways you can plan and save for your own retirement. For one, you can use any employer-matching 401k contributions, where you can actually get ‘free money.’ You can also start a Roth IRA, which offers future tax-free withdrawals.
Furthermore, you can take advantage of the power of compound interest by saving and investing at the same time. Check high-yield savings accounts and investment products that suit your financial situation and goals. Another vital thing to arrange for your retirement is your healthcare needs. Apart from the traditional approach of getting health insurance, you can also take advantage of services offered by in-home care agencies. Some examples of such services include sick recovery care, assisted living, and respite and senior in-home care.
4. Add them to your health insurance plan
Having a baby is a qualifying event for a health insurance plan, which means you can enroll your child in your coverage. As a matter of fact, it’s necessary to let your insurance company know you have a child. In general, the moment your baby is born, he or she will be covered right away. Depending on your plan, the insurance will cover all of his or her healthcare procedures, checkups, and other medical expenses.
You also have the option to switch to a different health plan so both of you can have better coverage. In changing your health plan to cover your child, some things you should consider are monthly premiums, specific hospitals and doctors crucial to you, and your typical healthcare expenses.
5. Update beneficiaries on your accounts
To ensure your money or assets will be given to your child in case anything happens to you or your spouse, you can add them as beneficiaries of your accounts. Some examples of these financial accounts are life insurance policies and retirement accounts. You can also designate them as beneficiaries for your personal bank accounts and different assets. As most individuals have their spouse as their primary beneficiary, you can generally add your child as a contingent beneficiary. Talk to your family lawyer or financial advisor to help you arrange everything.
Being a first-time parent can be exciting and overwhelming. But you’d also have to acknowledge the fact that having a child is expensive, and the only way for your family to be financially stable is to have a proper plan. Be sure to take notes of our tips and get ready for some big financial changes. Adapt to your new financial reality.