How to Financially Prepare for Your Growing Family

iCrowd Newswire
11 Aug 2022, 21:02 GMT+10

According to the CDC, August has the higher number of births on average each year. That's coming up soon, and if you're expecting this summer, there's still some time to prepare for your new family financially. In this article, we'll dive into five ways you can financially prepare for your growing family. Following these will help you transition smoothly into caring for your new child.

1. Get a life insurance policy

A life insurance policy can protect your family in your absence. With life insurance, you pay monthly premiums to keep your policy active. If you pass away while the policy is active, your beneficiaries receive a substantial death benefit to replace your income and cover any debts.

There are many kinds of life insurance, such as term and permanent life insurance. Once you compare the types of policies, you'll need to look for life insurance quotes. Looking for life insurance online is a great way to do this. You can compare life insurance quotes from several insurers quickly, making it easy to find a policy with the coverage you need within your budget.

2. Update your budget

Caring for children involves many new expenses, so you'll need to update your budget to account for these. You may also find that you need to cut costs elsewhere to afford these childcare costs. Use this time to slash anything you don't need, then reconsider your other spending to see if you can save more money.

3. Set aside more for emergencies

Many experts recommend having at least three to six months of living expenses set aside for emergencies. You should aim for even more if you're having a child soon, such as six to nine months. First, having a child means more expenses in general, which means you'll need more stored away. However, having a new child increases the chance you'll need to use that emergency fund. For example, if you need to take time off work beyond any parental leave offered, or if there's an emergency related to your child, having the extra emergency savings will be extremely helpful.

4. Think about college costs

Tuition rates are rising every year. The earlier you begin saving, the better if you want your child to go to college. They won't have to rely on student loans as much if they have more money saved. Look into college savings accounts, like 529 Plans or Coverdell accounts. These let you grow your contributions, and gains withdrawn could be tax-free when used on qualifying expenses.

Custodial investment accounts are also worth considering. These are accounts put in your child's name but managed by you. Once your child reaches the age of majority, they get full control of the account. As a result, these accounts can be a great way to start building your child's finances early. It can provide them with additional funds for college and other costs when they reach adulthood.

5. Update your estate plan

Having a new child necessitates that you update your estate plan. This will ensure your assets are passed down correctly, helping you avoid probate court and potential family conflict. Part of estate planning includes updating beneficiaries across all your investment accounts. Check with all your financial institutions and update your list of beneficiaries after your child is born.

Create financial security for your new family

A new child is a huge financial commitment. But by following the right steps, you can minimize stress and feel financially prepared. Start by getting a life insurance policy to ensure your family's covered if the worst happens. After that, update your budget and slash unnecessary expenses before adding to your emergency savings. Then, plan for the future by looking over your options for college savings and updating your estate plan. Taking action on these items as soon as possible helps you maximize financial security for your growing family.

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