From Insurance to Budgets: Becoming a Financially Savvy Parent

From Insurance to Budgets:
Becoming a Financially Savvy Parent
 
Did you know that the cost of raising a child from daycare to college — and if we’re honest, probably a little bit beyond — is more than $200,000? For many parents, this number can seem intimidating, but they know that the value of raising a happy, healthy child is truly priceless. However, that doesn’t mean you can ignore financial planning. For parents, getting your finances in order can sometimes feel like trying to move a mountain. How can you get a grasp on financial planning to become more confident in your abilities as a parent? You have important questions — and we have some solid answers.
 
Unexpected Expenses and Insurance
 
From broken bones to broken cars, parenthood comes with a degree of being comfortable with a lack of control. While you can’t do much to prevent surprise situations, you can be prepared for them financially. One way to do this is to have an emergency savings fundthat is separate from your regular savings. If possible, try to save up three months salary in this emergency fund, which can help offset blows like when you or your partner is laid off, a car breaks down, or there is a hospital stay.
 
We all know health insurance is a must these days, especially when you have a family, but so is life insurance. A life insurance policy can provide for your family in the event of your or your partner’s death. Setting one up now can give you peace of mind, and you can always settle your policyin retirement as a way to free up necessary cash. When looking to purchase life insurance, make sure you take the time to understand the different policies, how and when you can cash out, and the variety of cash values and premiums valuable to you.
 
Creating a Solid Household Budget
 
Creating a budget for the whole family isn’t something that happens overnight, especially if you want to put together a realistic budgetthat isn’t too restricting. First, start by documenting your spending; don’t change any habits. Do this for a few weeks or even a month so you can see the areas that suck up the bulk of your cash flow. Once you know where your money is going, you can have better control over how you spend it. For example, did you know that the average American spends more than $3,000each year on eating out? If you’re tracking your spending, you can easily see how eating out adds up. This is an expenditure you have more flexibility with than a mortgage or a car payment. If you spend $500 a month on eating out, consider budgeting only $250. This means you may eat out less or choose more reasonably priced establishments.
 
The Cost of Childcare
 
Childcare is expensive in the United States— most families pay almost $10,000a year per child for care. Paying these expenses can be a heavy burden on some families, which is why planning and preparing as best as you can ahead of time can lighten the load. First, see if your company provides a dependent care flexible spending account, which lets you use pre-tax dollars to pay for childcare. When it comes time to do your taxes, you will get a bigger break for having a dependent, but you can also write-offthese childcare costs. If you are lucky enough to get a refund, you can put that money directly toward paying for childcare. If you still need help, consider asking a retired family member to help, a friend who is a stay-at-home mother, or go job hunting — many employers provide on-site childcare.
 
Sitting down and reviewing your finances can feel like opening a can of worms, especially for parents who get cold feet when it comes to numbers. But no matter what your financial situation looks like, becoming a financially savvy parent is a battle you can win. Make the process more painless — for you and your whole family — by setting up an emergency savings, managing a household budget, and planning for childcare.