(Editor’s note: please welcome Chris with some suggestions for managing finances in advance of having children. Thanks Chris!)
If you are expecting a baby in the coming months or planning to start a family, there are financial matters you’ll need to consider. When the baby arrives you will have additional expenses to deal with. If you haven’t prepared for that, it could put a significant strain on your finances.
According to LV=, children cost on average £200K from birth to when they graduate at 21! That amount looks astronomical at first glance, but that includes feeding, clothing and educating your child as well as the other essentials over 21 years.
Most people need to live within a pretty strict budget of some sort to keep the family finances on track – and budgeting can also help to avoid the need for borrowing. If you’re planning a family, or you’re a new parent, you can learn about budgeting and money-saving information.
In the meantime, here are some financial matters that all parents-to-be should be thinking about.
Getting your finances in order
- Life Insurance In the event of your death, life insurance could pay out a lump sum or a regular income to your loved ones. You might feel it’s morbid to think about your own death, but at the same time there’s obviously a financial element in your responsibilities to your child. If you died while they were a minor, would your partner be able to support them? This can be particularly important if you are the main bread-winner.
- Write a will On the subject of mortality, making a will can provide peace of mind. No one wants to think about dying, but you may find peace of mind knowing exactly where your finances will go.
For example, if you and your partner are cohabiting, but not married, they won’t necessarily be left with anything if you’ve not left a will. Also, without a will, there could be debate or confusion as to who would look after your children in the event of your death.
- Savings You may not have £200K (approximately $321,000) in the bank right now, but hopefully you will have some savings for the new arrival! When the baby arrives, there’s likely to be a lot of initial expense that you didn’t have before – and that you might not have expected – and this can put a strain on any budget. However, whatever amount you can save will improve your future financial security.
See your savings as ‘an emergency fund’ for unexpected costs that crop up. Most financial experts suggest three months’ income as a good ‘safety-net’.
It just makes sense to start saving before the baby arrives and organize things like your will and life insurance in anticipation of their arrival. When they do arrive, you’ll be very busy getting to know your baby and might not find the time for financial matters like this.
Photo provided courtesy of Matt Stratton via Creative Commons license, some rights reserved.
Earnest Parenting: advice for couples planning a family.