6 Financial Planning Tips for Parents
The parent-child relationship is the most crucial and fundamental one. It teaches us how to socialize, develop our personality and relate with other people throughout our lives. It is considered to be the most sacred, selfless, and strongest form of relationship and love.
This relationship comes, of course, with a ton of responsibilities that are not easy to handle for many parents. Raising your children, feeding them, caring for their needs and health, looking for the best education possible, among countless other tasks become your main focus for many years. On top of that, your children’s needs keep changing fastly over time, therefore you will need to administer your resources wisely, following a plan that suits you in order to avoid any problems.
Financial Planning is key in order to have a healthy financial life in a family. The earlier you start planning and the more time you can span, the greater your results will be.
Financial planning also shows that you care for your children and you look out for their future and your own. If you’re interested in learning how you can financially plan for your beloved children, this article is the right fit for you. Interiorize these useful tips in your life and you will have the resources to overcome any obstacles.
1. Calculate your Expenses
The first step, actually for anyone who wants to have a healthy financial life, is to calculate how much money you’re currently spending. Categorize your expenses in those that are unavoidable like taxes, rent, credits, etc., and those that are flexible like weekly groceries and shopping. The more accurately you can do this, the more effectively you’ll be able to manage your money.
You’ll also need to calculate your household’s income and make sure your expenses are never higher than that. You must divide your earnings accordingly, to each one of the expenses you have on a weekly or monthly basis. Set aside 10 to 20% of your salary for savings, investments, or your children’s college.
When a new baby is coming to the family you’ll need to consider the monthly checkups, parents’ medical leaves, medical expenses, delivery expenses, hospital fees, and health insurance.
2. Evaluate Your Current Standing
Do you have a stable job? Are you receiving a variable or a fixed income? Do you own any properties? Are you struggling with debt? You must evaluate all these aspects when making a big decision like welcoming a new family member. Your current financial and social status will directly influence the kind of environment in which your children will grow up. Is it a safe neighborhood? Are there good schools close by? Do you own a vehicle? You get the point.
A loving parent will strive to build the warmest, safest and most loving home possible for their children.
3. Plan Your Child’s Future Ahead
This is the most important step when we talk about financial planning for your kids. One major expense is education, which varies depending on the standards and orientation that you want for them, along with their own preferences
You probably want them to attend the best school in town, based on your needs, and this may sound easy, but it can get very difficult sometimes. Fees, school materials, sports, events, books, and other daily expenses will take a considerable chunk of your income.
Make a list of such possible expenses, find out how much it could cost you and how much you can set aside for each item. Claiming your child as a dependent may allow you tax deductions and other benefits, according to eligibility.
4. Avoid Emotional Shopping
Emotional Shopping occurs when you buy something you don’t need, influenced by any particular emotion you’re experiencing. This type of spendings are impulsive and very harmful to your finances. If you want to make any important purchase make it a gradual process. Save little by little, consider credits that give you a positive net income, apply for tax deductions, and use wisely the other tips presented here.
Don’t go buying a car just because it’ll be the envy of your neighbor. Have a reasonable savings and investment plan and gradually upscale it. Once you have children, your expenses will increase, therefore you’ll need good liquidity to keep up with emerging needs. Some of those expenses will be predictable, but many won’t be.
5. Keep Some Savings For Disaster or Emergencies
Nobody wants the worst-case scenario to happen, but this doesn’t mean you shouldn’t be prepared. It’s very important that you have an emergency fund, health and other insurance relevant to you. Sometimes deaths happen suddenly, so considering life insurance is also a good decision.
6. Control Your Spending Habits
Sometimes it’s not impulsive or emotional shopping that harms your finances, but your daily spending habits. Many of us like to get a good fancy meal right after we claim our paycheck, others prefer to go out for a drink every Friday or Saturday night, or some people just spend more money than they should, and at the end of the month, they’re asking when did all the money vanish.
When you have children, you need to be wise and measured in terms of spending. Those summer vacations, the expensive clothes… all that must not be a priority if you can’t afford it. You have to plan your groceries, cut expenses, save for the future, ideally keep a record of every single penny you spend if that’s possible to you.
Conclusion
Any caring parent wishes to provide the most fulfilling and happy life for their children. Your children are a part of you and that’s an unbreakable and magical bond.
If this is what you want for your children, you need to ensure yourself a financially healthy life, in order to meet your own goals and build a bright future for your children.
Financial planning is an everyday process that should be a habit for the rest of your life. Some parents may find it difficult to manage their spendings wisely, controlling the impulse of emotional spending, or raising their kids. Keep in mind that planning is not an extra effort to parenting, but a time-saving and problem-solving habit. I hope this article has provided you a good insight on the importance of financial planning for parents and some initial steps to take action.