Children are always a blessing but lack of adequate financial planning may result in poor upbringing of the child, stress to the parents and poverty to the household. In order to provide for a child, give her quality education and put her through college, the parents require to draft a clear financial management plan before the child is born. Here are some of the most important areas you should look at when creating a financial management plan for your first kid:
Run the Numbers
– No one figure can be stated as the amount that one needs to have raised in order to comfortably raise a child. In the US, a middle-income family spends more than $250,000 in raising a child until the age of 17.
– The true cost of raising a child varies widely. It primarily depends on the income of the parents, their savings and the goals they have for their young one.
– One can however use calculators offered by various websites to calculate the expenses he or she will most probably incur in the first year.
– Build a safety net of 6-9 months of savings. This will come into play case one/both parents lose their sources of income.
– In the cases of divorce or separation, it is important for both parents to have an agreement of how they will support their child. In extreme cases where a parent chooses to neglect his/her responsibility to the younger one, the guardian should contact the Child Service Agency (CSA) for assistance on creating a support arrangement plan between the two parents by the state. The CSA phone number can be easily found over various media sources such as the internet.
Creating a Budget
– The primary expenditure when having a first child is on food and clothes. These are usually very affordable.
– Other hidden expenditures surface once the child is born like increased health insurance premiums.
– To be well prepared and not be caught in surprise, parents who wish to have their first kid should visit the various parenting blogs that offer information on saving and budgeting of money.
Get Life Insurance
– Once the decision of having a first child has been made, long-term planning should start as early as during pregnancy.
– One should determine the amount of life insurance he/she needs as a new parent. This can be done by first determining how much is needed to pay off on mortgage and put the child through college.
Here are a few steps on how to do this:
- Find and name another person as the guardian.
- Create a comprehensive inventory of all your assets and debts then store it safely in a place that can be accessed by other people.
iii. Constantly review and update the beneficiaries on insurance.
- Write down a will.
Social Security Number
– Parents should quickly get their child a social security number.
– A person needs a social security number to be able to claim his/her child as a tax dependent and to open a savings account under his/her child’s name
– After the child’s birth, delaying this will make them lose time on saving for their child’s college.