There's so much to think about as a new parent, and it can be easy to let financial issues that aren't immediately pressing fall by the wayside for a while. But money is how you keep your young family secure, and smart planning now can make things much easier for you in the future. Below are a few common mistakes that you should try to avoid.
Not Paying Off Debt
If it's easy for you to keep up with minimum payments, it can feel like whether your debt is fully paid off is the least of your worries, but the fact is that every month that you carry a balance on your credit card, you are losing money in interest rates that you could be putting toward your family's future. Most people can't afford to pay off the whole balance all at once, though. One option is getting a personal loan, which often will provide a more favorable interest rate compared to a credit card. You can review a guide that explains in detail how this can be helpful for you.
Not Beefing Up Emergency Savings
There are so many money tips for cash strapped parents, and this is one of the biggest. If you don't have any emergency savings, it's time to start, and if you do have it, it's time to increase it. This is the money you'll need when something inevitably goes wrong, whether it's a kitchen appliance failure, a sudden need for a car repair, a sick pet, or another unexpected event. Conventional wisdom says you should have enough to cover three to six months of basic expenses, but with a young family, six months is really the minimum that you should have.
Not Having Life Insurance
Every family will need to decide for themselves where to direct what may be limited financial resources, but you might want to consider both life and disability insurance. You can get a relatively inexpensive life insurance policy, and this can mean security for your children and your spouse if anything happens to you. Your employer might provide disability insurance but look over the policy and see if it is sufficient to cover expenses if one parent is out of work. If not, you may want to get an additional individual policy.
Choose Retirement Over College
Ideally, you'll be able to put away money in a retirement account and a college savings account for your child, but if you can't afford both, it's usually best to prioritize retirement. There are a few reasons why this is the case. One is that the money that you put away now for retirement will grow so much more compared to money that you put away later if you wait. Another is that there are several different options for your child to pay for college. They might even get a full scholarship. Finally, protecting your future retirement helps your children as well as you. You don't want them to end up in a situation where they are caught between supporting children of their own and supporting you as well because you did not plan and save enough.
