How to Financially Plan for Your Child’s Future

It’s no secret that children are expensive. According to the U.S. Department of Agriculture’s Expenditures on Children by Families, the estimate to raise a child from birth to age 17 in a middle-income, married-couple family is $213,610. This figure includes housing, food, clothing, healthcare, childcare, and transportation. (The total can be even higher if you add a private school, extracurricular activities, college savings, and other miscellaneous expenses.)

When starting a family, it’s easy to get caught up in the thrill of bringing a new life into the world. But before you start adding to your nursery shopping list, you want to crunch some numbers and implement a strategy for saving. Now more than ever, it’s crucial to have a plan for the future that ensures your child and family will be cared for.

Consult with Human Resources

Having a baby means that you or your partner will have to take time off from work after the child is born. The first few months of an infant’s life will be quite an adjustment, so being home together is ideal. For information about maternity and paternity benefits, you will both need to speak with someone in your job’s HR department. If you or your partner have worked at your current place of employment for a year, you are entitled by the Family and Medical Leave Act (FMLA) to take up to 12 weeks of unpaid, job-protected leave. The stipulations for paid maternity leave are based on your employer, however, federal law entitles mothers to short-term disability pay, which typically spans six to eight weeks. Knowing this means you need to start putting aside funds to offset the loss of income expected from unpaid maternity leave.

Plan Where You Will Live

Adding children to the mix may necessitate the need to purchase a larger home to make room to grow (and store the endless amount of toys). In your search, location will be important, and you’ll want to create a checklist of exactly what you’re looking for in your home. The ideal home will be near a good school system, have quick access to healthcare, and tout a low crime rate. You may wish to be close to family and friends, so don’t forget to factor this in as well. Budgeting for children may not leave much room for a down payment, but there are several financial options to explore such as tapping into your IRA, borrowing from your 401(k), or taking advantage of special homebuyer programs.

Buy Life Insurance

As a parent, your number one concern will be the well-being of your family. A life insurance plan is the best way to protect your family’s financial future should something ever happen to you. You may already have a group life insurance policy through your employer; however, if you are starting a family, it is best to consider taking out your own policy just in case you part ways with your job at some point down the line.

he two main types of life insurance are term policies and whole life policies. A term life insurance policy provides coverage to the policyholder over an allotted period of time. Should something happen to you during the lifespan of a term policy, a payout will be given to your beneficiaries.

Whole life insurance, meanwhile, provides lifelong coverage and includes a cash value. The premium will never fluctuate during the life of the policy, the death benefit is guaranteed, and the cash value account grows at a guaranteed rate. Should your family experience financial hardship, you can borrow money against the account or surrender the policy for cash. To discuss your life insurance options, and to be sure you are getting the best policy for your family, consult with a life insurance agent.

529 Plan

A 529 plan is a tax-advantaged savings plan designed to save for the cost of college. With the current student loan debt among Americans being $1.3 trillion dollars, investing in a 529 plan shortly after the birth of your child will ensure that you or your child won’t be burdened by trying to repay debt. Even though you won’t know your child’s collegiate goals for some time, you can use an online calculator to get an idea of how much college may cost by the time they turn 18.

Although there are many stresses associated with being a parent, starting a family will be one of the most joyous experiences of your lifetime. The best way to be fully present in raising a child is to prepare ahead of time in any area that you can!