3 Ways to Prepare Your Finances for Parenthood
Posted on Tuesday, October 20th, 2009 at 12:43 pm in General Payday Loan Tips
Congratulations! You’re expecting your first child, and you couldn’t be more excited. It’s likely you’re starting to feel a bit overwhelmed too. So many questions – will your baby have blue eyes or brown, will he or she be a scientist, an artist or an accountant? And what are we going to call him or her? Oh, and how are we going to pay for everything he or she needs for the next 18 years, or even longer?
There are a lot of things you can’t control when it comes to your baby, but there are some steps you can take to help prepare your finances for the daunting task of raising a child to adulthood:
1. Open a 529 college savings account: One thing you need to remember is that it’s more important to save for your own retirement than for your kids’ college education. So if money is a bit tight, your retirement fund should get all your money. However, you should still open a 529 college savings account for the cash gifts your son or daughter receives until he or she goes to college. Whenever the child gets a birthday check from grandparents or godparents, cash for graduating from high school, or even receives his or her wages from a part-time job, consider putting some or all of the money in the 529 account.
This is a tax-deferred savings account that is sponsored by your state and managed by a state-appointed fund manager. In some states, contributions to a 529 account are fully or partially tax-deductible, and as long it’s used to pay for college tuition, fees, room and board, the money isn’t taxed when it’s withdrawn either. With the cost of a college education expected to increase threefold over the next couple of decades, you need to maximize your college savings in any way you can!
2. Buy life insurance: Life insurance is a must when you have a family. It’s more economical to go for a 20- or 30-year level term life policy than a permanent plan, however. Figure out how much income you would need to replace, and for how many years, including paying off your home instant online payday loan and sending your kids to college, if appropriate. Even if one parent is at home looking after the children, you’ll need to insure each of you for at least $100,000 a year. Remember that the surviving parent might need to hire someone to help with housekeeping, childcare and so on.
3. Start living on one income right away: When your little bundle of joy arrives, you’ll probably have to manage on one income for a while, so why not start now? If you make the necessary adjustments to your lifestyle while you’re pregnant, you’ll be able to save some money for the new baby in addition to getting used to living on less. Even if the baby’s mother plans to return to work, the current employment crisis means it’s by no means certain that you’ll both have an income to rely on.
- You Can Use a 529 Fund to Help Your Children Get To College
- Helping Your Kids With College – Make Sure You Save
- Help your kids get ready for college – making sure you save for education
- Planning Your Financial Future
- Prepare for Emergencies with Cash Advances
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