Adding to the family can be an exciting period in your life, but it’s also expensive.
From insurances to emergency funds, here are the 5 biggest financial decisions to help better plan your family’s financial future.
Set Up An Emergency Fund
The rule of thumb for an emergency fund is to set aside 3 to 6 months of your average monthly expenses.
Not to be used as downpayment for a big ticket item (such as a car), an emergency fund is your personal safety net to be used strictly for the following reasons:
- Loss of job.
- An Illness (family included)
- Unexpected big-ticket expenses.
Additionally, note that a credit card isn’t an emergency fund. An emergency fund should be highly liquid, and you should be able to use it on demand. Ideally, this will be set up in a savings deposit.
Readying up For Retirement
Too many parents are focused on saving up for their children’s education that they put their retirement plans on the backburner.
First off, don’t.
Secondly, saving for your kids’ education is important but many forget that there are loans and scholarships also available for that. However, you can’t exactly “loan” money for your retirement. Ideally you will allocate funds for both purposes, even if it means a smaller amount for each fund.
Instead of deciding on a set amount, consider the lifestyle you want to maintain after you retire. Money for food, transport and health care only covers the very basics of needs, but what about your travel dreams? It’s never too early to start thinking about your retirement investment plan — one that will provide you with monthly passive income — so you can live the way you want to in your golden years.
Opening Your Child’s Savings Account
Rather than having their money mixed up with your own personal savings, opening a childs’ savings account allows them to build up their own personal savings. Birthday cash from grandparents? Into the account it goes! Not only will this help with organising their finances, it would instill the habit of saving from young.
Life Insurance
As you grow your family, you might be thinking of ways to grow your income. However, ensuring that they’re protected is just as important – which is why getting a life insurance in essential. It ensures that your family is provided in an unexpected life event when a parent (or worse, both) lose the ability to work.
Bound to negatively impact the family’s finances, life insurance also needs to be considered for the person working on the home. The costs of replacing someone to do domestic chores, home budgeting, and childcare can cause significant financial problems for the surviving family.
Instead of deciding on a set amount, consider the lifestyle you want to maintain after you retire.
Creating a Will
Many put off writing a will because it might be a morbid idea – but it is also isn’t smart. In the event of an untimely death, having arrangements already in place for your children and family would be helpful in times of grief.
People would usually name their children or surviving spouse as the beneficiaries of their accounts, ensuring that any assets or money they have is given to them. Alternatively, you may also choose a separate guardian of the estate, who will manage the accounts and assets until your children reach legal age.
