Becoming a parent is a major milestone in a person's life that marks the start of a new chapter. Like many life changes, this time of happiness and excitement comes with increased responsibility. Parenthood and finances go hand-in-hand. It's important to take steps toward a solid financial foundation you can build throughout your child's life.
We broke down common financial aspects for every age and stage to create the ultimate guide to parenthood and finances. Keep reading to learn how improving your financial literacy can prepare you and your child for success.
Preparing For Your Baby
Before your child arrives, there are things you can do to build a strong financial foundation for the future.
Adjust Your Budget
When you are adjusting your budget for your new baby, there are a few categories that important costs fall into. Some examples are purchasing everything you may need for the baby at home, such as furniture, clothing, supplies, and diapers.
Starting a Savings Plan
After you find out that you're expecting, it's important to ensure that you have a savings plan in place to cover future expenses and in case of emergency. If you don't have an existing emergency fund, start one right away. If you have one, make adjustments to your contributions accordingly.
Review Insurance Coverage
Before welcoming your baby, review what healthcare costs you may encounter during pregnancy. Talk with your doctor or contact your health insurance company for more information about the services your plan covers.
Early Years
As your child grows, their needs and related costs change as well. Here are some things to consider when taking steps into childhood.
Consider Childcare Costs
Make a plan for childcare when or if caregivers must return to work. Important costs to consider include daycare and transportation expenses. Supplies needed for daycare or school are another cost to include when budgeting.
Plan For Health and Wellness Expenses
Planning for health and wellness expenses is a natural next step after reviewing your insurance before the arrival of your baby. Ensure you know your coverage and plan to cover the costs of any required routine and emergency medical care.
Research Tax Benefits
Parents have the ability to take advantage of various tax benefits to add some wiggle room to their budgets. Talk to your financial advisor to understand and apply these credits and deductions.
Start Teaching Your Child About Money
Financial education can be tailored to kids of any age, and it's never too early to start learning about financial literacy. For younger children, you can play games involving money. Use flashcards, fake money, and your imagination to make financial literacy fun.
School Aged Children
Before you know it, your child will be starting their educational journey. This exciting milestone comes with new financial situations you should consider in your budget.
Budget For Educational Expenses
As your child ages, the cost of childcare will morph into educational-related costs. These may include school supplies, transportation costs, or fees related to extracurricular activities.
Save For Their Future
If you haven't already begun saving for your child's continued education, this is a great time to start. Set up an account, especially for this purpose, and make regular contributions.
Continue Fostering Financial Literacy
Allowance and Chores are fantastic real-world examples of saving and spending for your child. Create a piggy bank or save and spend jars to help your child understand how to manage their money. You can also start involving them in real-life monetary transactions. Walk your child through the purchase process during a trip to the financial institution store.
Preparing for College or Trade School
As your child approaches adulthood, it's time to ensure they have a strong financial footing. Talking to your child about their financial future is more important than ever.
Budget For Their Future
As your child approaches adulthood, ensure you include financial planning in your discussion about their future. If they plan on attending college, vocational training, or post-secondary education, look into scholarships and financial aid.
If they choose a different path, help your child budget for independence. We have a blog on post-graduation financial planning that can help regardless of their pursuit of continued education.
Turn Financial Literacy into Financial Independence
Before your child goes out independently, ensure they have their own checking and savings accounts. Depending on your child's situation, consider the possibility of a credit card to help your child build their credit. Discuss responsible credit card usage to prevent this from negatively affecting their finances in the future.
Bringing a child into your life is an exciting time and mastering parenthood and finances is an important part of your family's future. The most important thing you can do is start early and adjust your financial plan as needed. Vibe Credit Union is happy to celebrate every milestone with our members. We wish you luck on your journey into parenthood!
