Six Ways to Get Ready (Financially) for Your First Kid
Most first-time parents are full of excitement, nervousness, anxiety, and joy. This rollercoaster of emotions surrounding the arrival of your first kid may be exhilarating, but don’t let it block out the practical preparations you need to make.
Having your first child is not just about preparing a loving, healthy atmosphere for them once they arrive. You will also want to make sure you are financially prepared.
Many first-time parents have not considered what having a child means in terms of, for example, expanding their investment portfolio.
But having a kid means being financially ready, and that includes, among other things, stocks and investment options. In this article, we will take six ways to get financially prepared for your first kid.
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1. Start Saving Now
Whether you are planning to have your first child in the next year, or not for another handful of years, the best time to start saving is right now.
Make an emergency fund for unexpected expenses, including hospital bills or last-minute childcare coverage fees.
Try to save the equivalent of one month’s worth of expenses so that if the unexpected does happen, you and your new family will be taken care of for that amount of time.
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Work your way up to three and then six months as you get more comfortable adding to your savings account. And be sure to keep your emergency savings fund separate from your regular daily spending account.
That will not only help you keep track of how much you have saved so far, but it will also make it easier to avoid accidentally spending those emergency savings.
It is never too early to start setting aside money that will help pay for all the expenses related to having and raising a child. The earlier you start saving, the better.
2. Assess Your Current Finances
As you start to prepare for your very first child, it is important to take a good hard look at your finances. Honestly assessing where you actually stand now is important; you don’t want to be deluding yourself or trying to square your numbers so that they match a picture that you haven’t quite reached yet.
Try not to feel overwhelmed by thinking too far ahead into the future. Instead, ask yourself some pointed questions and be real with your answers.
Framing your current financial situation as a series of questions is a great way to honestly assess your situation. Ask yourself how much debt you currently have and what type of debt it is.
Is it manageable student debt that you are expecting to pay off regularly over a long period of time? Or is it more high-interest credit card debt that needs to be taken care of quickly?
Then think about your spending habits. Do you currently live paycheck to paycheck, or have you already begun to set some savings aside? How much money do you spend monthly? Weekly? Do you have a separate fund for emergencies?
Asking these types of questions can help you to take stock of where you currently are, so that you can plan ahead effectively, with a more realistic sense of what hurdles might be coming up for you.
3. Take Out Life Insurance
While it may not feel particularly joyful to be thinking about life insurance just as you prepare for your new baby, it is extremely important.
Life insurance is a key element to making sure your whole family is stable, secure, and supported, even in case of an emergency.
The most affordable option for new parents is term life insurance. If possible, new mothers-to-be should take out a policy before getting pregnant- the additional health issues caused by pregnancy can lower your approval ratings and boost your monthly premiums.
4. Make a Will
Again, it may not be the most bright and sunny subject, but you will want to make sure that your family is covered in any worst-case scenario.
Preparing a will is a smart way to ensure that your family’s future is secure and that you are covered even if, say, a piano falls on your head.
5. Make A Childcare Plan
One of the key choices that every new parent couple has to make is how to deal with childcare.
Will both parents go back to work?
If so, who will take care of the child during working hours?
Or will one of you stay at home instead?
Even in that case, every couple needs a break sometimes, and while your auntie and best friend will kindly offer to step in every once in a while, you will need a more sustainable childcare plan.
Child care is not cheap, either. This is not a department where you want to skimp, since whoever you are paying will be responsible for your child’s well-being.
Start to research child care options well in advance of your baby’s due date.
Make a budget spreadsheet for what kinds of child care options are out there, from regular daytime nannies to local babysitters to daycare. Then plan for your extra expenses.
Knowing how much you will need to set aside can help you determine when to go back to work after the baby is born.
6. Invest For The Future
One of the smartest ways to prepare for your child’s arrival is to consider their future in the far distance.
Investing in stocks now can help create an additional savings fund for your child’s future, one which accumulates in value as they grow older.
Think of it as a college savings fund, or a wedding savings fund, or a first apartment in the big city savings fund.
Whatever destination you are saving for, investing even a small amount is a smart way to build up an extra source of funds for your child for years down the line.
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And with Wealthface’s robo-advisors, you can figure out the best way to invest for your child’s future.
Preparing far in advance is the key for creating a financially stable future for your child.
Take into account how much your life costs now, and factor in additional costs for once your child arrives, like child care. Prepare for worst case scenarios with life insurance and an up-to-date will.
And start separate savings pools for the future with an emergency savings fund and a separate investment portfolio. Years down the line, your child will be glad you did.