Discovering that your family will be expanding with the birth of a child can be both exciting and a little frightening. Statistics show that to raise a child you can plan on spending an average of $245,000.
Taking the time to ensure that you are financially prepared to handle the expenses your new child will bring can reduce the amount of fear you might feel about becoming a new parent. Here are three tips to help you get financially prepared for your child.
1. Establish a college savings account for your child.
Attending college will give your child one of the best possible opportunities for success, but paying for an advanced degree can be difficult. If you want to reduce the financial burden you will face when your child decides to enroll in college, start saving now by establishing a 529 college savings account.
These types of college savings accounts are designed to reward parents for being proactive when it comes to financial planning. Taxes on money deposited into a 529 college savings accounts are deferred, and once the money has been used for tuition or college expenses, you will never pay taxes on the balance.
2. Evaluate your life insurance policy.
In the event of your untimely death, will your family be provided for? Many people understand the benefits of life insurance, but few take the time to determine just how much life insurance they need to ensure their family will be provided for after their death.
Sit down with your spouse and create a list of your monthly expenses, Calculate your debts, and combine this number with your monthly expenses to determine how much income your family will need to survive for an entire year. Purchase enough life insurance to last at least a year. This will give your family time to financially recover from your loss without worrying about money.
3. Protect your assets with a trust.
Protecting your financial assets will ensure that you have the money you need to raise your child. This task is best completed by establishing a trust. Trusts are designed to separate assets from you personally, thus protecting them from creditors and lawsuits.
If you own your own business, having a trust or limited liability corporation set up is essential. The risks of doing business will not affect your personal assets, which means that even if your business takes a financial hit, your personal finances will not suffer.
Preparing financially to have a child is important. If you need help, you may want to contact some financial planning services. Be sure that you take the time to establish a college savings account, evaluate your life insurance benefits, and create a trust prior to the birth of your child.