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A First-Time Parent’s Guide for Making Wise Financial Decisions

Welcoming a child into your life is a monumental event, and it’s also expensive. Most parents can expect to spend nearly $12,980 per year per kid—and that’s not including college costs. Fortunately, there are ways parents can protect their finances, making smart decisions for both their and their children’s futures. Cris Johnson’s Amazing School Assemblies & Library Shows outlines a few ideas below.

Invest in Life Insurance

For your child, the biggest threat to their well-being is not having their parents around. Whether you’re a single parent who works, a partnered parent who stays home, or you’re the primary breadwinner, life insurance can give your family peace of mind.

A 20-year term life insurance policy can be ideal for new parents. The policy protects your child if one of you passes away, giving them financial support until they become an adult. Funds can also pay for college or provide for kids into adulthood.

For parents of toddlers, especially, 20 years may be the perfect coverage span—with the policy lasting until your child graduates from college. Plus, in comparison with whole life insurance, term life insurance is often cheaper.

Start Saving for the Future

Most parents want to save for their new baby’s future but aren’t sure where to start. Before you begin putting money away, think about your savings goals. If you want to save for your child’s education, a 529 college savings plan might be a good fit. Conversely, if you’re going to save cash for your child—for any purpose—a children’s savings account makes more sense. As your child grows older, you can teach them how savings and interest rates work, and how math is used in the real world, much like what Cris Johnson teaches in his fun and interactive math assemblies!

There are plenty of ways to put away more money, such as cutting down on unnecessary spending, trying to follow the 20/30/50 rule, and lowering monthly mortgage payments. For the latter, it’s a good idea to get a handle on how much you can actually afford in a house payment, an especially smart thing to do if you’re planning on buying a new home. Use an online monthly mortgage calculator to determine the amount.

There are a handful of savings options for parents, such as custodial accounts and trusts. Parents can open a savings account that they co-own with their child or choose a custodial account, which limits the child’s access until adulthood. A trust is a more complex way to put aside money for your child as it involves a lawyer, an executor of the trust, and other legal formalities.

Don’t Forget About Retirement

With new parents, there is often a focus on the child’s well-being. While understandable, this train of thought can leave the parents out of the conversation. Giving your child financial solvency is an admirable goal. However, you should remember that you must prepare for your future, too.

Bloomberg highlights that 48 percent of older adults surveyed in 2016 said they had nothing put away for retirement. A traditional pension can help, but you should also save in an IRA or 401(k) account. As the estimated cost of living continues to increase, older adults may also struggle to cover their bills in retirement. Help your kids if you can but also sock away a reasonable amount for yourself.

If you’re a homeowner, you may be able to downsize and sell your home once your kids are adults. Selling your home can help fund your retirement, and it’s a good idea to get a general estimate of how much it’s worth. You can use a home proceeds calculator which will provide an estimate based on public data and sale and value history.

Teach Your Children How to Manage Money and Save

While you may not start by counting dollars with your newborn, it’s vital that you impart financial wisdom onto your children. Parents magazine recommends teaching kids age-appropriate money management, starting with practicing delayed gratification.

Preschoolers can begin learning which coin is which, and grade schoolers can earn an allowance. By junior high, your child can open a bank account to better manage their spending (and hopefully saving).

With junior-high and older kids, discussing the stock market and the basics of investment can provide insight. By the time your child reaches adulthood, they’ll understand crucial financial topics like interest rates, credit scores, and more—which might be the greatest financial gift you can give them.

Money is a major consideration when couples (or singles) begin planning their families, but by following the above guidelines, financial preparation becomes simpler. With these key items out of the way, you can concentrate on enjoying the present while your financial future remains secure.

Cris Johnson’s Amazing School Assemblies & Library Shows helps school officials make their elementary assembly programs unforgettable, educational, and fun with motivational programs consisting of magic, music, CLEAN comedy, and audience participation that reinforce the curriculum and encourage good character! Reach out today for more info! 716-940-8963