People frequently describe children as precious, adorable, happy, and cute. However, there’s another adjective that people tend to forget: expensive. It’s a heart-warming kind of expense because you’re providing for one of your dearest treasures, but it’s still an expense.
Raising a child requires serious planning, both for day-to-day expenses and for the road ahead. Think of your dollars as bricks that you carefully lay to build a road toward your child’s future, and use these tips as guideposts to help you on your way.
Adjusting your emergency cash
Experts recommend keeping an emergency fund totaling three to six months worth of living expenses. If you and your partner both have stable incomes, three months of savings might be a workable choice for you. If there’s only one breadwinner in your household, or if one of the breadwinners has sporadic income, you might want to lean closer to the six-month mark.
Starting a college savings account
If you expect to send your child to college, it could be in your best interest to start planning now. Putting a little bit of money aside each year will cost less per year and be easier to achieve than scrambling at the last minute to find the funds. According to the U.S. News & World Report, costs for college will continue to rise, potentially to $44,000 per year in 2030.
One way to save for college is through a 529 college savings plan, pre-paid tuition plan, bank savings account, U.S. government bond, or mutual fund. Another solution is an endowment life insurance policy that combines adult life insurance protection for you with a secure, flexible and guaranteed-amount nest egg for your child when they are ready for college or whatever the future holds. No matter which method or methods you choose, be consistent regardless of the amount, since saving a small amount is always better than saving nothing.
Buying children’s life insurance
Children’s life insurance builds cash value over time and protects you financially until your child reaches age 21 and becomes the policy owner. It then automatically enables lifelong financial security for your adult child, with no health questions asked or medical exam required. This kind of insurance policy also could be used to help pay for a child’s college expenses.
For example, for as little as pennies a day, you could buy a Gerber Life Grow-Up® Plan children’s whole life insurance policy for your child. The coverage amount automatically doubles during the year that your child is age 18, but the locked-in, child-size premium rate stays the same for the life of the policy.
The big picture
Integrating the various financial considerations into your short-term and long-term planning is the first step toward getting a handle on how your finances change when you become a parent.
To learn more about how you can give your child a head start in life with the Gerber Life Grow-Up® Plan, tap the button below.
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