• Tuesday, May 21, 2024
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BusinessDay

Early family financial planning puts you at advantage

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Having your family financial planning early before children starts coming is very important in helping you stabilise and cope with challenges that are associated with that stage of life. This is because the plan would have gone through its gestation period while you are still single or living only with your spouse.

Remember that once they start coming, it will affect your budget and your financial priorities, because you will no doubt make changes to your financial plan as soon as you begin to expect your first child and going forward. The changes will protect your family and make it possible to still reach your financial goals even with the added expenses of children in your life.

According to Miriam Caldwell, personal finance specialist, one of the first things you need to do is to purchase life insurance for you and your spouse as soon as you realise you will have children. You may want to purchase about five times your annual income. The money can be used to live off, and to pay off your home.

Even if your spouse does not work, you should buy life insurance for her. This will help to cover the additional childcare costs and other expenses that you may face as a single parent. A will is just as important, since it will choose who will take care of your children if something were to happen to both of you.

You can also set up a trust for your children with the life insurance money going into the trust. You should talk to a lawyer to set up your will and trust. This will not take very long, but you can rest easy knowing that it is completed.

Another expense that you will need to consider she said is the cost of college for your children. You can begin to set aside money in a savings account each month. The sooner you start setting aside money, the easier it will be to send your child to school.

Furthermore, you need to continue to contribute to your retirement accounts, even with the additional expenses of a child. You do not want to be a burden on your children when you retire, and planning for your retirement will prevent this from happening in the future. Continue your contributions to retirement even if it means cutting your spending in other areas. If you both continue to work, you should both be contributing to your retirement accounts.

When you have a child, your budget will change regardless of whether you choose to have one parent stay home or you continue to work. Daycare is very expensive and the other costs associated with having children add up quickly. You will need to rework your budget and determine if it is a better option to have one spouse stay home or to put your child in daycare.

This is a complicated decision, and the answer will be different for each family. Different factors will go into the decision, and each family may arrive at the decision for different reasons. 

 

HOPE MOSES-ASHIKE