Starting a family is an exciting and rewarding experience, but it can also come with more financial responsibility. There are always surprises, but new families can better plan for the future by anticipating major milestones and expenses wherever possible. Here are five key strategies to help new families stay prepared for whatever the future may hold:
Build an emergency fund
An emergency fund is a savings account set aside for unexpected expenses or financial emergencies, such as medical bills, car repairs, or job loss. Building an emergency fund can be important for new families, as it can provide a financial safety net to fall back on during challenging times.
How much you need to save depends on many factors, including your income and expenses. If you haven’t started an emergency fund, now can be a great time to begin. Start by setting aside a portion of your monthly income in a dedicated savings account and gradually build up your savings over time.
Set up a college fund
Education is one of the most significant expenses new families will face. Setting up a college fund early on can help alleviate the financial burden of tuition, fees, books, and living expenses when the time comes. Many parents opt for a tax-advantaged 529 college savings plan, while others may rely on a traditional savings account or custodial account. The best fit for your family will depend on your specific circumstances, so it’s important to research your options carefully.
Budget well and spend wisely
A good budget can be the foundation of good financial habits. Creating a budget allows you to track your income and expenses, identify areas where you can save money, and work toward your financial goals. As your family grows and your financial situation evolves, it’s important to revisit the budget you’ve created so you stay on track.
When you look at your budget, pay attention to how you spend disposable income. For example, you might be spending a lot on restaurants—and that might be exactly where you want to spend your money. However, you might also realize you’d rather put this money toward more long-term goals like family vacations.
Consider life insurance
Life insurance can be a crucial component of financial planning for new families. In the event of your death, life insurance can provide your loved ones with financial protection and support, ensuring they can maintain their standard of living and meet their ongoing expenses. Term life insurance provides coverage for a set period (for example, 10, 20, or 30 years). Families can use the insurance payout for anything, including to cover funeral expenses, pay off outstanding debts (such as mortgages or loans), replace lost income, and provide for future financial needs.
