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If you’re anything like I was during my first pregnancy, you spent nearly a year in nesting overdrive. I couldn’t resist the urge to obsess over every little detail concerning my baby. Whenever I could catch a break from morning sickness (which, by the way, should be called all day sickness), fatigue, and the relentless desire to eat everything in sight, I dove into every baby book, guide, and catalog I could get my hands on. Out of all the time I invested in poring over reviews for baby gear, dreaming up the perfect nursery color scheme, and imagining the absolute best future for my child, I overlooked a key aspect of providing a secure life. I’m talking about long-term financial security.
The fact is, like most Americans, I was woefully ignorant concerning personal finance. My husband and I were too busy learning how to meet our immediate survival needs.
Since then, we’ve come a long way and our children will reap the rewards from our journey towards financial freedom.
This guide is a snapshot of seven money moves you can make now to protect your children’s financial future. I hope these tips will help you and your family on your own journey of creating financial success.
Money Move #1: Establish or beef up an emergency fund
As my father-in-law says, “The first rule of life is: Surprise!” Smart women like you should already have a little cash stashed away for all the little surprises that life brings. With a baby in the picture, those surprises seem to happen more frequently and at a greater cost. If you haven’t been able to save any money because you’re experiencing a financial crisis every week, then you especially need to prioritize establishing an emergency fund.
Set a small, yet attainable goal for establishing your emergency fund. Start with $1,000 dollars. Put away at least 5% of your income each month until you have enough. This is important: DON’T TOUCH IT. If you are constantly dipping into the fund, you’ll have nothing to fall back on when the time comes. Set this money aside in a separate account or stash it in a savings jar in your home. Do what it takes to make sure that money is available.
After you’ve got your initial savings fund in place, beef it up. Some experts recommend putting away as much as 20% of your income into savings with a goal of having 6-12 months worth of income socked away. Does that figure seem out of reach for you? If your husband’s salary only enables you to live paycheck to paycheck, or if you’d like to get ahead with savings, consider starting a home business.
“The first rule of life is: Surprise!”
Money Move #2: Begin saving for college
The cost of sending a child to college isn’t going down anytime soon. Start saving for tuition on day one with a 529 plan. These state-sponsored, tax-advantaged savings plans cover all qualified university costs such as tuition, room and board, textbooks, fees, and computers.
There are no age limits nor time limits for enrollment. However, this is an investment plan that is not guaranteed by the state and may be subject to market risk. Find out more about the benefits, risks, and potential fees from a broker.
An alternative to a 529 plan is investing in a prepaid tuition plan. Learn the difference between these two options so you can make an informed decision.
Money Move #3: Squash Shiny Object Syndrome
Preparing for baby is one of those milestones that is right up there with planning your wedding. And if you’re not careful, you can overspend on baby gear just like you probably did on your wedding.
Take it from me, mama: When it comes to buying clothes and gear for your baby, less is more.
Young bodies change so rapidly that it makes little sense to buy tons of clothing. The toys that interest your kiddos today are soon cast aside in favor of the new and exciting gadget.
Do yourself and your budget a favor by not getting carried away with spending on your baby. Capsule wardrobes are an excellent solution for maximizing style without breaking the bank. Choose classic, durable toys that stimulate imagination and creativity instead of flashy devices that break almost as soon as you bring them home.
If you want to get the most bang for your buck, do your shopping through Ebates. You can earn money back on the regular purchases you make from all your favorite stores just by using their program. As a special perk to the readers of Savvy Mocha Mama, you’ll receive $10 now just by signing up.
Money Move #4: Update Your Estate Plan
Estate planning sounds like something only the fabulously rich do, but no matter what your worth is, you’ve got to protect your assets.
Everyone has an estate. In short, your estate is all your money and property.
You may be surprised to learn that there is already a default plan in place for your estate. If you die without indicating your wishes regarding the distribution of your estate, your state of residence will make those decisions for you. The outcome of that plan may be detrimental to your loved ones, especially your children. Take the time to create a plan that will create the best case scenario for the ones you would leave behind.
Though there are tutorials and services available for DIY estate planning, making these weighty decisions should not be done on your own. Seek out professional help to help you create a will, a living trust, and any other documents to manage the provisions you wish to make for your children. Your spouse’s employer may offer estate planning services as a company benefit, so take advantage of that option if it’s available. You could also contact your state’s bar association or get a referral from your bank to find an attorney who specializes in estate planning.
Money Move #5: Review Your Insurance Plan
When you have a baby, your insurance company will give you a period of around 30 days to add your child to the plan. It’s up to you to contact your insurance company and to provide the documentation they need to get coverage for your child.
Note: Beware the out of pocket costs you may have to cover while you’re waiting for insurance coverage to kick in for your baby. We had to shell out $500 for a procedure during our second child’s first month of life. We were eventually reimbursed, but paying for that unexpected expense and the medical care to follow was an unpleasant start to welcoming our little guy.
After baby makes three, the insurance choices that once worked for you and your spouse will need to be reevaluated. Shop around for the best rates and do your research to make sure you neither have too much nor too little insurance.
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Money Move #6: Revamp Your Budget
All these changes in how you allocate funds once you have a child mean your budget is due for a major overhaul. Depending on your household income and expenses, this adjustment may be smooth sailing or it may leave you feeling hopeless.
If your budget isn’t looking as rosy as you’d expected, hold off on the despair. You may need some training on how to create a budget that works, some ideas on how to trim expenses, or tips on how to earn money as a full-time mom.
Creating a clear picture of your current net worth will help you determine the right financial goals for your needs. If you are an American citizen, research shows you are likely in debt. If you’re already struggling with debt, having children is going to make the problem worse if you don’t have a plan to fix it. Use one of these budget plans as part of your foundation for a healthier financial future.
Money Move #7: Shore Up Your Retirement
Wait, isn’t this list about how to create a better financial future for my children?
Yes, it is. Bear with me here.
Ensuring your own financial security long after your baby birds have flown the nest is essential to providing your kids with future stability. Ideally, junior will be around to care for you when the time comes, but that sort of financial obligation may not be feasible when he is figuring out how to care for his own family. Being a good parent means doing your best to avoid hindering your child’s prosperity down the road.
As a stay-at-home mom, you likely don’t have a retirement fund. This is a mistake.
Perhaps you’re thinking, “Of course I have retirement savings! My husband has a plan through his job…”
Let me stop you right there. Your husband’s retirement plan is his retirement plan. You may be a beneficiary on the account, but you still need to have a retirement savings of your own. If living on one income is challenging for you now, imagine the squeeze when you are living out your golden years with a fraction of the money your household runs on now.
Not a pretty picture.
If you’ve ever worked outside the home, you may be able to roll over a retirement plan from a previous employer into an IRA. Other options include a Spousal IRA or a Self-Employed retirement fund. Whichever option you choose, be sure to contribute regularly and, as with any other savings account, pay yourself first.
Now that you have an idea of what you need to do to shore up your child’s financial future, don’t hesitate to take action! Choose one of these steps to implement today.
Which move are you going to take first? Which ones have you already taken? I’d love to chat with you in the comments section below!
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