Most new parents understand that raising a child is expensive — in the US, the average cost of raising a child through the age of 17 is $233,610, according to data compiled by the United States Department of Agriculture (USDA).
Majority of the costs are obvious — necessities like food, clothing, health care and housing. But when you become a parent, you’re not just focused on short-term needs. Long-term goals, such as creating a secure financial future for your child, may come about.
To make sure you set up the systems needed to achieve your goals as a parent, all while taking care of your little one, you may want to involve an expert.
If you’re expecting a baby and have questions around the following five topics, you may want to hire a financial advisor.
How to Budget for a Growing Family
If your household doesn’t already have a budget in place, now’s a good time to implement one. Creating a budget is essential, not only to make sure you don’t overspend, but also so that you have enough money to save for the other important things on this list. A financial advisor can assist you in this process by reviewing your current household budget and informing you of expenditures that will be needed for your new baby.
How to Save for a Child’s Education
Currently, the average cost of college in the United States is $35,331 per student per year. Parents who choose to pay for their child’s post-high school education, whether in part or in whole, can take advantage of savings plans like the 529 college savings plan. A financial advisor can help you decide if investing in a 529 is best for your individual wants and needs, and can inform when to start saving. While the earlier you invest, the more you’ll be able to leverage time, it might make sense for some families to fund their emergency savings first, for example.
How to Afford Childcare Costs
According to the USDA report, the third largest cost for raising a child under six is childcare and education, which are likely attributed to daycare costs. When the reality of these costs set in, some new parents find themselves weighing their options, specifically if one parent should quit their job to care for the child full-time. Financial advisors can help new parents navigate this decision.
How to Get Insurance in Order
If a parent doesn’t already have life insurance, the birth of a child is typically a big motivation to purchase a policy. That said, there’s a lot of intricacies that come with the decision to get life insurance, such as:
- Do I actually need life insurance?
- What life insurance coverage amount is best?
- What life insurance coverage is needed if both parents work?
- If one parent doesn’t work, is it still worth it for them to get a life insurance policy?
Financial advisors can provide insight on all, and more, of these questions.
How Much Emergency Savings is Enough
Growing your family naturally means growing your emergency savings, or emergency fund. The ideal size of emergency savings is going to depend on factors like your expenses, lifestyle and debts, but the typical recommendation is to save enough to cover anywhere from three to six months of fixed costs. With a new addition to your family, this may mean you have some work to do. A financial advisor can help you determine a goal for your emergency savings, and also help put a plan in place to fully fund it.
Financial advisors can offer even more suggestions for new parents when it comes to child preparedness. Given the high costs of raising a child, implementing financial planning strategies now will only help the future of you and your kids.