3 Basic, But Important, Financial Planning Steps Every Parent Needs to Complete
by Sara Bailey
Whether you are preparing for a new baby or just trying to be a more responsible parent, financial planning is essential. Because providing financial stability for your children can be just as crucial as providing care. For many parents, though, knowing where to start is the most stressful part of financial planning. If you need some help with your own financial plan, here are some important tips to keep in mind:
You Need Life Insurance and a Will
As a parent, you would do anything to protect your little ones from harm. But how can you make sure your kids are protected, even when you’re not around? Thinking about your own death may not be pleasant, but it’s one of those tough planning steps that every responsible parent has to take. You can start by looking into life insurance. Because many parents plan on providing financial support for their children after high school, a 20-year term policy may be a smart choice. Just think of it this way: If you have a toddler or an infant, you have 20 years or so until you will need to pay for college or other expenses of young adulthood. A 20-year term life insurance plan will provide an added financial cushion during those two decades, even if the unthinkable happens to you. And to make sure that money is properly used for your child’s best interests, you also need to draft a will. A will is also needed to appoint legal guardians for your children, which is crucial if you want to have a say in where they go if you should pass away.
You May Want to Think About Investing in a Home
If you want to beef up your assets, buying real estate can be a smart move. Before you invest in real estate, though, you will need to sort through your current finances to make sure that buying a home is the best choice for you and your family. For example, you may need a down payment in order to secure the best financing for your new home. A down payment is the lump sum that a home buyer pays at the close of a real estate transaction, so researching how much you will need to afford a new home can be a helpful financial planning step. If you want to use a conventional loan to purchase your home, then you can avoid having to purchase private mortgage insurance with a down payment of 20 percent. These loans also offer flexible terms and down payment options. No matter what size of down payment, you need to fund your home purchase, having a detailed family budget can keep you on track and help you reach your savings goal.
You Need to Start an Emergency Savings Account
Having insurance and assets can help protect your family’s financial future. When you have the monumental task of raising children, though, having some additional financial protection can give you some added peace of mind. That’s why parents need emergency savings. Having some money set aside for those rainy days will keep unexpected expenses, like home repairs or even medical emergencies, from upsetting your carefully laid financial plans. Now, you may be wondering how busy parents can start putting away those funds and growing their emergency savings accounts. Well, you can start by using a high-interest savings account that is separate from your everyday accounts, so that your emergency fund can grow faster. If you have a smartphone, you can also use money-saving apps to automate your savings plan. These apps can round up your purchases or even give you cash back at certain retailers, so that building your family’s emergency savings fund can feel like less of an effort for you.
Financial planning is something that every responsible parent needs to do. Even if you are working with limited time or a limited budget, be sure to take care of the basic financial planning steps listed above. Doing so can protect your children and provide you peace of mind.
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