First Steps for Financial Planning When You’re a Parent

posted in: Money Blog

Every new parent should take some time to sit down and go over their finances to plan for the hurdles that lie ahead. With that being said, no one is perfect — and some parents wait a few years before buckling down.

Whether you have a toddler on your hands or your child is no more than a gleam in your eye, there is no better time to start planning financially than the present. A good financial plan will help you create a budget for the life you want now and the future your child dreams about. Furthermore, financial planning provides a sense of protection should something happen and you can’t be there for your child in the future.

Life Insurance for Parents

If you already have a life insurance policy to protect you and your spouse, be sure to contact your agent and adjust your beneficiaries to include your child. If you are the type who never thought about life insurance until your kid came into the world, there is a bit more work in store for you. Life insurance provides death benefits to your family should you die of certain causes.

There are two types of policies: term life insurance and permanent life insurance. Term life insurance is more cost effective, but coverage ceases after a certain amount of time — usually 10, 20, or 30 years. There is no payout to your beneficiary if you die after your term life insurance is up. However, you can renew your insurance for another term or even convert portions of it to permanent coverage over time. Haven Life explains that you can conveniently research affordable term life insurance by comparing quotes and filling out an application on your phone or computer.

Permanent life insurance is good for those who will have someone that will depend on them financially for the rest of their lives, such as sole breadwinners with stay-at-home spouses. These life insurance policies cost more and help those with a large estate invest in their family’s future without subjugating their inheritance to estate taxes. Permanent policies also have a cash value, meaning they can be settled in retirement as a way to free up cash. The amount you spend on life insurance reflects a few different factors, including how many years of income you expect your policy to cover and the number of financial obligations you may leave behind. The costs of your premiums can also be affected by your age, sex, health, smoking habits and even your hobbies.

Planning for the Worst

Beyond life insurance, your financial planning should include a course of action and savings specifically for the costs should you die. It’s not a pleasant topic to discuss, but it can prevent financial disaster for your family should the unspeakable happen. The death of a spouse and the death of a parent are two of the most stressful events in a person’s life. Pre-paying for your funeral takes a huge responsibility off their shoulders while they are in the midst of grief.

There are different pre-pay options to consider when planning for funeral costs. A joint savings account in your name and your beneficiary’s name gives them direct access to the funds so they can carry out your burial and memorial wishes as you see fit. This is a reasonable option for those who do not want to be buried in a standard funeral home, but instead want a more eco-friendly method of burial or alternative memorial.

If you want your life insurance policy to cover these costs, factor those amounts in to your plan and eventual payout so your dependents have enough to pay for your funeral and still have enough to live on going forward. Some insurance companies will provide a final expense insurance policy addendum to supplement your coverage. Those looking for a more traditional memorial also can find a burial insurance plan.

Starting From Scratch

When you aren’t comfortable with numbers, budgeting can feel like a huge challenge. But it does not have to be that way. The MoneyTracker.com 7-Week Budgeting eCourse can get you on the right track without overwhelming you. By signing up for this free program, you will receive one email message each week. These emails contain simple tasks you can complete to help you get your money in order one step at a time. Couple this course with The Budget Kit, and you will have the tools you need to curb spending, make better financial decisions, and give your children the life they deserve.

When you have a kid, you are responsible for another life in so many ways. You want to make sure they are secure in every way possible, even in the worst circumstances. Life insurance provides your family with financial security should the worst happen. Furthermore, saving for memorial services can prevent your family from going into debt during an already difficult time. Talk with a family financial planner about your options and how to budget for your family’s future.

Author Bio

After losing her husband Greg, Sara Bailey created TheWidow.net to support her fellow widows and widowers. She learned that there is no handbook for those who have lost a partner and suddenly find themselves raising children on their own. She is also the author of the upcoming book Hope and Help After Loss: A Guide For Newly Widowed Parents.