Financial Planning for New Parents
New parents have a lot of important choices to make in their lives, now that they are a growing family. The most important of these choices is the economic direction that the new family will take. As a new parent, financial planning can help prepare for the unknown and build security to ensure a happy future for all. Here are some basic family financial planning tips to get you and your new addition off on the right foot.
Budgeting Is Simple and Essential for New Parents
If you haven’t already organized your financial life, parenting preparation also provides an excellent opportunity to assess your income and spending. Without a budget, many people spend much more than they should. Having a budget is not about depriving yourself; instead, it results in knowledge and discipline that helps avoid foolish spending. A budget is also a useful tool for reviewing the previous month's expenditures. And since there’s a new mouth to feed, a budget can help you plan for future expenses. It is estimated that in India, the average expenditure on a child in a middle class family for 21 years, from conception to college, is Rs. 67.4 lakhs at current level of inflation. As inflation increases, this figure grows as well.
When developing a budget make sure to include savings – not only for surprises but anticipated expenses in the future. For example, if daycare expenses are on your horizon, you can forecast the need and build some savings. Savings can also help fund vacations, which are important ways for families to bond and share joy. When vacations are not planned financially, they can be sources of considerable stress. Budgets can also set aside funds for numerous unexpected expenses related to house and automobile repairs, both of which can strain a family’s finances.
Part of budgeting also includes understanding your net worth. For most families, real estate is the main asset. In order to accurately calculate assets, you need to take into account your home’s fair market value. Value is best determined by recent sales of comparable properties. Luckily, today’s technology streamlines the process in a way that is adequate for big-picture views of your financial status. Check out sites such as Zillow and Trulia to scan recent sales in your neighborhood, and you’ll have a fairly good idea of your home’s value.
New Parents should Prepare for Child’s Security
Insurance is another major component of family financial planning. Insurance plans can provide benefits in the event of the death of a parent, and they can also provide financial stability when a parent is unable to work due to disability. Since a child relies heavily on their parents' ability to earn income, a variety of insurance policies may be helpful.
New parents should also familiarize themselves with different tax benefits of having children. When you have children, your entire tax picture is likely to change. In addition to dependent exemptions, there are deductions for childcare costs, out-of-pocket medical expenses, and other financial responsibilities that affect families.
For New Parents It’s Never Too Early to Plan
There are different saving schemes promoted by both banks and by government and mutual funds. Sukanya Samriddhi account scheme for girl child is such a scheme promoted by government which offer higher interest rate for savings for your girl child. The benefits of such accounts vary from tax benefits to better interests. With better interest rates and tax benefits, the corpus to grow along with the child.
But, new parents should never forget to save for themselves too. Financial experts stress the importance of saving for retirement as well, and some say that if the choice is between retirement and college savings for children, you should choose retirement. This is because while your children may have other options for financing their education, your options for funding your retirement are very limited.
Parenthood is an exciting time. Use the opportunity to take steps to strengthen your future through financial planning.
