When you become a parent, your finances get a lot more complicated. You suddenly have to face a whole host of new financial responsibilities! Young parents must be prepared to cover additional household expenses, save for their long-term goals, and protect their family from hardship in the event of an unexpected financial emergency. There’s so much to consider, it can be difficult to know where to start. Here are some helpful tips to point you in the right direction!
Start Planning for Retirement
Planning for your own retirement may not be your top priority when you’ve got young kids, but it should be! Waiting too long to start saving for retirement means missing out on the benefits of compound interest. As a result, you’ll have to contribute much more of your own income to end up with adequate savings for your retirement.
Start saving and investing money for retirement now! If you’re feeling lost, consider working with an experienced financial professional from Lifetime Retirement Partners who can help you build a solid foundation for your future.
Consider Buying a Home
Do you dream about buying a home for your growing family? Start planning today! The earlier you start planning for a major purchase like this, the better. Time explains that the steps involved in buying a home can feel overwhelming, but tackling them ahead of time will ensure you are financially prepared.
It’s always a good idea to secure a loan before you start looking for homes. Getting pre-approved for a mortgage will let you know how much home you can afford and will also show sellers that you’re serious about buying. Start doing some research now to find out what kind of mortgage is right for you! For example, conventional home loans offer low interest rates, but they often require higher credit scores and down payments than FHA loans. Check out PennyMac current rates to get a better idea of your options.
Plan for Emergencies
One of the most important parts of planning for your family’s future is having a solid energy plan in place. What if you lose your job or your child needs a costly medical procedure? What if your home needs a major repair or your car breaks down? Can you cover these emergency financial events without throwing your family into debt? If not, it’s time to build up an emergency cushion.
Most financial experts recommend that families keep at least six months’ worth of income in an emergency savings fund, but any amount is better than nothing. Just be careful not to overfund your emergency savings! Keeping too much money in a regular savings account could mean losing money to inflation over time.
Purchase Life Insurance
Buying life insurance is another crucial way to plan for the unexpected, and one that Parents.com explains is an essential when you have kids. If you pass away unexpectedly without a life insurance policy, the people who rely on your income—particularly your kids and spouse—could face financial hardship. Besides replacing your lost income, you can even get a life insurance policy that will pay off your home or put your children through college! If you’re on a budget, consider sticking with an affordable term life insurance policy that will cover the years that your kids will be dependent on you.
Avoid Lifestyle Inflation
Lifestyle inflation can make it difficult to keep your finances in track as you start earning more money through career promotions, personal side-hustles, or passive income ventures. Lifestyle inflation occurs when people allow their spending to increase with their rising income. This will stagnate your savings and hold you back from meeting your financial goals. To avoid lifestyle inflation, Clever Girl Finance recommends being mindful of your spending habits, sticking to a household budget, and setting up automatic savings through your bank.
It’s no secret that our lives change significantly when we have children. Make sure you’re financially prepared to handle all of the additional expenses—planned and unexpected—that come with starting a family. With a good financial plan, your family will have all the resources you need to thrive and grow for years to come!
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