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Ask an older parent for advice, and often they will tell you the same thing: consider your finances. Between diapers and daycare, baby supplies and school supplies, caring for a child can be expensive. That’s not to mention the broader implications of having a dependant – the need to plan for the unexpected with a will.
Amid all the other new responsibilities you take on as you become a parent, you should carve out some time and energy for financial planning. Getting parenthood started on the right foot financially can help you weather the ups and downs of an uncertain future with your newly arrived family member.
In this post, let’s explore a few notable tips, such as meeting with a lawyer specializing in wills, creating an emergency fund and purchasing life insurance.
Make a Will and Name Beneficiaries, Guardians
A will is an essential document detailing your wishes for when you die. It encompasses not only plans for your money, assets and real estate, but also guardianship – who will look after your child if you and your spouse pass away or are not in the picture?
You should be able to choose your beneficiaries and preferred guardians rather than leaving the decision-making up to the government. If you die intestate (that is, without a will), it may take a significant amount of time for your estate to be distributed. Government courts may appoint a legal representative for you who distributes your estate in ways you never intended. And your child may end up with a guardian not of your choosing.
It’s not easy to consider a future where you aren’t around, but it is what’s best for your child. Luckily, there are online law firms that make the experience easy and affordable. You want to save as much of your time, energy and money as possible to care for your child, which is why partnering with an online law firm makes the most sense when creating a will.
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Create an Emergency Fund
Not everything goes as expected. Occasionally, unforeseen expenses arise, like home and auto repairs. You may lose employment and need a few months to find a suitable replacement job.
In cases like these, it’s helpful to have a reserve of money lined up. To calculate how much to put away in an emergency fund, start by envisioning a worst-case scenario. Let’s say you lose your job, and it takes six months to find a new one. Your emergency fund should be equal, then, to about six months’ salary. Create a goal within your budget (see below), and contribute a small portion each month.
Develop a Budget (and Stick to It)
In business, they calculate “cash flow.” For a family, it’s more commonly termed “the family budget.” In either case, the principles are the same. Look at two main categories: income and expenses. List your monthly expenses, budgeting a reasonable amount for variable costs like food, home supplies, clothing and personal care. Then check that against your income (the money you receive from various sources like jobs and child benefits), tweaking your variable expenses until you arrive at a balance.
Start Saving for Post-Secondary Education
Post-secondary education doesn’t come cheap, which is why many parents start saving from the get-go. Your children may choose to forego post-secondary education, or they may be lucky enough to receive financial aid when the time comes. But saving just in case is never a wrong move.
You can consider opening an RESP (Registered Education Savings Plan) and talk with a money specialist about how much to contribute annually.
Consider Life Insurance
As mentioned in the section on personal wills, you never know what may happen in the future, so it is best to plan for the worst.
Purchasing life insurance protects you and your family against unforeseen issues like death, health problems or loss of ability to earn income. And acting now may also lock you into a lower rate. Before you trust an internet article, though, speak with an insurance specialist about your options!
Don’t Neglect Yourself
You should still save for retirement. Even with all the mounting obligations – the strict budget, the costs of insurance, the RESP contributions – it’s okay to think about yourself. While financial aid options exist for post-secondary education, no such options exist for retirement plans. You want to enjoy your later years in relative comfort, and your kids – when they grow up – will want the same for you.
If you’ve recently started a family or are awaiting the arrival of a first kid, follow these straightforward financial tips to get started on the right foot.