When you’re raising a family, financial planning can fall by the wayside. After all, children can be expensive, and your saving strategy may have some holes. Young families can start financial planning a bit smarter when they know what to expect and where to start.
Just-in-Case Is a Smart Policy
Life, in general, is unpredictable. That means any protection you can imagine having “just-in-case” is likely worth the investment. For example, thinking about — and paying for — your funeral in advance can feel a bit morbid. However, whenever you pass away, your family won’t be left holding a bill, which may total $9,000, if not more.
Planning out your eventual funeral helps relieve your family’s stress during a difficult time and funding it ahead of time removes the financial burden. Other end-of-life issues should be pre-arranged well in advance as well — because anything can happen.
Life insurance is always a great way to ensure your family is covered in the event of untimely death.
It’s Never Too Early to Start
Whether you’re building a nest egg, saving for retirement, or socking away funds for a future down payment on a home, it’s never too early to begin working toward your financial goals. Many young families make the mistake of thinking they have plenty of time to set aside money and tie up loose ends. However, life tends to move quickly, and before you know it, it could be too late to get the best deals or capitalize on your investments.
The best time to start saving (and investing) is now. Budgeting smartly and contributing as much as you can to your down payment fund or retirement accounts and investments means bigger gains down the line, even as you take things one month or one year at a time.
On the flip side, it’s never too late to start, either. Even starting at age 35 means you have over 30 years to save. The potential for a significant payoff is still there, especially if you diversify your investments between a Roth IRA, 401(k) and other accounts.
Prioritize Your Needs When It Comes to Saving
Many young parents are eager to begin saving for their children’s future. As important as college may be for your kids, prioritizing your retirement should be on the top of your list. Contributing to your retirement first ensures you’ll be taken care of in your golden years.
If you begin with your kids’ college funds, you may find yourself scrambling for funds as you approach retirement. By equipping yourself first, you’re more likely to be financially stable. This also means you may be in a better position to help your children with finances, too.
Also, there is no guarantee your children will go to college but you WILL retire.
Diversifying Helps Pad Your Portfolio
Diversifying your retirement portfolio — or spreading your funds around — can help maximize the return on your investment. Saving money in a checking account, for example, doesn’t earn you any dividends and may even cost you in account fees. However, a savings account or specialized retirement plan earns interest and may also afford you special tax protections.
Of course, you’ll also have options when deciding on a retirement savings strategy, notes Forbes. If you’re unsure about where to invest your money, consider getting an expert’s advice — even if it costs you. Wealth management is a crucial part of getting older, and the advice of someone who’s experienced in finance can prove invaluable.
Set Kids Up for College (Last)
Saving for your children’s college education may be an important item on your financial planning list. The good news is that there are many ways kids can pay for college — even without taking out student loans. Of course, it’s understandable that parents want to contribute to a college fund, and you have options there, too. From 529 college plans to ESA's and other educational savings plans, your money will go further with the right account.
Financial planning can be challenging for young families. But knowing how to prepare — and where to divert your money — can make a difference. By taking proactive steps, you and your loved ones can feel confident about your financial future.