Family Finances: Ensure Your Family's Future
Each of life’s milestones presents a new challenge, perhaps none more so than parenthood. In addition to being responsible for the upbringing of another person, you also must navigate drastic changes to your financial obligations.
“The expenses that come with raising children can be daunting,” said Jeremy Bristow, Assistant Vice President and Cashier at United Bank & Trust. “With extra food and clothing, childcare, extracurricular activities, and eventually college, taking care of a family is expensive.”
“As you add new members to your family and your children grow, it’s crucial to reexamine your finances and make necessary adjustments,” Bristow, who is also a father of three, added.
According to the Brookings Institution, the cost of raising a child born in 2015, from birth to age 17, is $310,605. This number doesn’t include potential college tuition costs but gives an idea of the significant change children add to your annual expenses. Following are six financial planning tips to ensure your family’s well-being.
- Save for their education. Just like retirement, it’s never too early to start planning for your child’s higher education. Consider creating a 529 plan for your children. It grows tax free, and your children will be able to make tax-free withdrawals if it’s used for qualified expenses, such as tuition, fees, books, or room and board. With a 529 plan, you can grow your child’s education fund over time, lessening the burden of educational expenses in the future.
- Buy a life insurance policy. If the unthinkable ever happens to you, a life insurance plan can ensure the loved ones who rely on you financially are taken care of after you’re gone. If you already have a life insurance policy, consider changing your primary and secondary beneficiaries when a child is born.
- Create an estate plan. Along with a life insurance policy, you should create an estate plan to determine what happens to your assets following your death. You will also need to determine a guardian for your children should you pass away before they become legal adults. The guardian you select can also be designated to manage the financial accounts you leave your children.
- Increase your emergency fund contributions. As a general rule of thumb, your emergency fund should contain enough money to cover 3-6 months of household expenses. When you have children, this number will increase as you’re now required to buy essentials for them as well as yourself. Recalculate your emergency fund requirements and adjust your contributions accordingly.
- Don’t neglect your retirement accounts. With the additional expenses that come from having children, it may be tempting to decrease or completely stop contributing to your retirement accounts. However, you must not neglect your retirement contributions. Although you’re worried about your child’s future, remember that your retirement plans could be delayed if you stop contributing to your retirement account entirely.
- Meet with a financial advisor. Set up a meeting with a financial advisor to help identify areas in your finances you can adjust to ensure your family’s future.
For more information about how United Bank & Trust can help you plan for your family’s future, contact us at (641) 753-5900 or [email protected].