Financial Tips for Young Parents
Money worries are always a vexing problem for even the most well-prepared young parents. The decisions that new parents make during the first few years of building a family can have far-reaching implications for their finances. If you and your significant other plan on starting a family in the near future, these simple financial tips for young parents will yield serious dividends.
Financial Tips for Young Parents
Craft a Budget Well in Advance
For the average family, raising a child to the age of 18 costs at least $200,000. Planning a budget before the kids arrive is clutch. Web apps that calculate the cost of raising a child depending on a variety of parameters are a big help. Figure out how much you'll have to spend annually and go from there.
Slash Debt to an Absolute Minimum
While home mortgages and some car loans are inevitable sources of debt, borrowing money should be avoided as much as possible. Pay off credit card balances before the kids arrive and rely instead on short-term, low-interest loans from a credit union for emergency expenses. Every dollar spent on interest is a dollar that really belongs in a college fund.
Pool Expenses with Other Parents
For first-time parents, initial upfront child-rearing costs can be daunting. Pairing up with other parents who have older kids is a great way to source hand-me-down clothes and toys. You can form support systems via PTAs and daycare centers to create used kid gear exchanges. Sites like ThredUP and Swap are great resources for selling or buying child-specific merchandise.
Go All In on Discount Programs
At a minimum, new parents should get memberships with bulk wholesaler businesses like Costco and Sam's Club. There are actually coupon search engines like CouponTom that allow frugal shoppers to hunt down the best deals that the Internet has to offer. Do a little research before you sign on with any service and fully commit once you've identified a money saver.
Build a Long-Term Investment Portfolio
Once you have kids, starting a nest egg is of paramount importance. A good portfolio should include inflation-sensitive TIPS bonds, some physical precious metal coins, and a few blue chip stocks. A Roth IRA is a great way to save money for both retirement and college tuition purposes. A good 529 plan or a Coverdell account is never a bad idea if you see your kids pursuing higher education.
Plan for the Unexpected Early On
As unpleasant as it may be to discuss, parents need to have a plan in place in case one or both of them encounter a disaster. Hefty life insurance coverage is a must if you have kids of any age. Bundle it with your home and auto insurance to get the best rates. Create a living will and appoint guardians as well as trustees and beneficiaries for your estate's assets. This is one of our most crucial financial tips for young parents.
Maintain a Substantial Cash Reserve
The best defense against the uncertainties of life is always cold, hard cash. If you have a rainy day fund to tap into, you won't have to get a loan for freak expenses while incurring interest penalties. Keeping at least a year's worth of living expenses waiting in the wings in case a calamity pops up is just common sense.
There's No One-Size-Fits-All Solution
The appropriate financial plan for your specific family will naturally depend on a variety of factors. The size of your family, regional costs of living, and your annual income as a household will largely dictate the best course of action. Nevertheless, these simple financial tips for young parents should apply to any family with small children and protect them from future uncertainties.
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