When you start a family, there is so much excitement and love in the air. It’s important to keep in mind, though, that the early days of welcoming a child are not as glamorous as certain types of media might have led you to believe. Making key financial preparations is one of the not-so-fun tasks that every new parent should tackle so that they can enjoy the days ahead without worry. Knowing what needs to be done can be a challenge in itself when you are just getting started, but you can chart a course by adding a few crucial matters to your financial to-do list.
1. Start an Emergency Savings Fund
Life is unpredictable, and children are even more so. Parents who quickly accept that accidents and illness can strike at any time are more likely to be prepared when things go south. One of the best ways to accomplish this is by building up an emergency fund.
Sustainable budgeting is one method that allows for the consistent building of your emergency savings. Putting away a little each month will go a long way, especially if you use a high-interest savings account.
2. Buy Your First Home
Depending on the state of the housing market at any given time, buying a home can be a bit of a scary endeavor. Keep in mind that home values typically trend upward over time, meaning that it could be a great investment that will pay off immensely for you or your children down the line.
Before you commit to moving and purchasing a house, however, consider your down payment situation. The down payment is an amount that you pay for a house up-front, regardless of the monthly payment plan you set up. The down payment can vary depending on your loan type, ranging from 3.5% to 20% of the home’s total value.
3. Begin the Estate Planning Process
While you might not think that estate planning goes hand-in-hand with financials, the fact is that writing a will or trust is a necessary step in ensuring that your children get the support they need if something should happen to you. Surveys show that 78% of adults under the age of 36 do not have a will. Many young adults neglect estate planning to the potential detriment of their children and their financial situation.
You can address the most pressing concerns by drafting a simple will or trust that you can expand upon over the years. Your simple will or trust should at least name your beneficiaries and appoint guardians for your underage children in case you are no longer around to care for them.
4. Expand Your Income Options by Starting a Business
Perhaps the most obvious method for overcoming pressing financial concerns is to generate more income. You can do this on your own terms by starting a business.
There are many considerations to account for when launching an enterprise, but the chief among them is your business structure. Opting to form your business as an LLC means that you will receive certain liability protections and tax advantages. You can use an online formation service to start the process.
Raising a child can vastly alter your perspective and priorities. It can make you understand that financial security for yourself and your family is among the most important factors in a worry-free lifestyle. Start an emergency fund, draft a will or trust, and consider purchasing a home, and starting a business. All of these things can help you lay a strong foundation for your family’s financial future.