Family Finances: Ensure Your Family's Future
Every life event presents new challenges. Perhaps, none more so than parenthood. In addition to being responsible for the upbringing of another person, you also navigate drastic changes to your financial obligations.
According to the Brookings Institution, the cost of raising a child born in 2015, from birth to age 17, is $310,605. Of course, every family is different, and that amount doesn’t factor in college tuition, but it shows that once you add children to the equation, a significant amount of your annual expenses will be spent on their upbringing. Following are six financial planning tips to ensure your family’s well-being.
Here are six steps for navigating the financial challenges of raising kids and saving for the future:
Save for their education — Just like retirement, it’s never too early to start planning for your child’s higher education. Consider creating a 529 plan for your children. It grows tax free, and your children will be able to make tax-free withdrawals if it’s used for a qualified expense — tuition, room and board, fees, and books. With a 529 plan, you can grow your child’s college education fund over time, lessening the burden of educational expenses in the future.
Buy a life insurance policy — If the unthinkable happens to you, a life insurance plan can ensure the loved ones who rely on you financially are taken care of after you’re gone.
Create an estate plan — Along with a life insurance policy, you should create an estate plan to determine what happens to your assets. You will also need to determine a guardian for your children if you should pass away before they are legal adults. The guardian you select can also be designated to manage the accounts you leave to your children until they reach a legal age.
Increase your emergency fund contributions — As we’ve stated previously, additions to a family increase expenses. If you haven’t done so already, recalculate how much you need in your emergency fund and adjust your monthly contributions to ensure you have enough saved for emergencies.
- Don't neglect your retirement accounts — With the additional expenses that come with having children, it may be tempting to stop contributing to your retirement accounts. You must not neglect your retirement contributions. Contribute less if you must, but contributing nothing will set you back and likely delay your retirement plans.
- Meet with a financial adviser — Set up a meeting with a financial adviser to help identify areas in your finances you can adjust to ensure your family’s future.
Contact Luana Savings Bank today to learn more ways to ensure your family's future.