The average cost of raising a child from birth to the age of 17 can cost over $23,000. So while becoming a parent is a very exciting time, it’s also crucial to start thinking seriously about your financial situation. From figuring out how you’re going to cover childcare costs to setting up a college fund and still having enough money for holidays and moving house, we’ve outlined some financial planning advice for new parents.
Set yourself a budget
Setting you and your family up with a budget and sticking to it is essential. Start by listing all your incoming and outgoings. Take into account everything that you regularly pay for such as mortgage or rent, insurance, taxes, and bills, but also things that come up less often like annual payments and holidays.
You should also prepare for a drop in your income as you or partner are likely to take time off work or reduce your working hours. Understand how much this leaves you with on a monthly basis and look for ways to cut costs and save money. Set yourself up with a weekly or monthly budget, as well as a certain amount each month for unexpected outgoings.
Whether or not you already have some money saved up, now is the time to start properly focusing on putting aside some money. It’s really important that you have some emergency savings to fall back on in case you fall ill or lose your job.
It’s generally advised you should have enough to cover household costs for up to six months. And it’s not just emergency money you need to save up, it might seem a bit early to think about college but higher education costs thousands of dollars. Now is the time to set up a college savings account that you can slowly build up to support your children later in life.
Spend some time looking into the best savings account that works for you and your family — be aware of restrictions about how much you can pay into it each month or how easy it is to access the money.
Focus on long-term goals
As your family starts to grow it’s important to focus on long-term savings goals. Your living situation might be great when it’s just the two of you and a small baby. But as they get older, or you decide to have another child, your home might start to feel a bit small.
By thinking several years ahead you can take some of the financial stress out of moving house and start to save up now.
And before you begin buying a new house, make sure you take on board all the advice you can get to make it go as smoothly as possible.
You need to have a good understanding of the whole process, from getting a mortgage pre approval to sorting out surveys and building inspections. Mortgages in particular can be a tricky one to nail down. Do some in depth research to learn more about pre approved mortgages and how to handle your finances when you move house.
A little preparation now will help you meet your long-term goals and make it easier to manage over time.
Make a will
One of the most important things to do when you have a new baby is to set up your will. As hard as it might be to think about not being there to see your child growing up, it’s essential that you put things in place in case the worst happens.
A will gives you the opportunity to name the person who will take care of your child if you’re no longer about. You’ll also name an executor in your will who will be responsible for paying any bills and expenses and transferring your property over to those named in your will. It allows you to decide how your assets will be handled and used to ensure your child is looked after financially until they are an adult.
It’s also important to assess what life insurance you have set up and whether you need to find better cover. It’s important that both parents have an adequate amount of cover that would help cover the lost income if something happens to one of you. Even if one of you earns slightly less or stays at home to look after the children, it would still have a significant financial impact from covering childcare costs.
These are the most important financial planning tips for new parents. It’s important to start saving and planning for your children’s future now to ensure that they’re safe and secure whatever happens.