Smart Money Tips for New Parents: Creating a Solid Financial Foundation
Get a Life Insurance Policy
If you don't yet have a life insurance, getting a policy in place should be one of the first things you do when planning for your family's future. Certain types of policies, such as whole life policies, have a cash surrender value (CSV), meaning you can cash them out later if you need funds. Additionally, you can borrow funds from some life insurance policies. Above all, life insurance policies serve as a safeguard to protect your family's financial future from loss of income from the untimely death of a parent.
Create a Budget and a Savings Plan
It's a wise idea for any new parent or anyone contemplating becoming a parent in the near future to create a budget and a savings plan. Whether you opt for investment funds or other long-term savings tools, you should set aside a percentage of your income each month (or from each paycheck) for long-term or retirement savings. Many parents are also opting to create savings accounts specifically for their children, and there are several account options designed for this purpose.
Establish Wills and Designate Guardians
Living wills and power of attorney (POA) documents outline the heroic measures you do (or don't) wish to receive in the event of an accident or injury that leaves you incapacitated. These documents can spare your children from having to make heart-wrenching decisions in the worst of circumstances. In a traditional will, you can leave your property and other assets to specified beneficiaries, as well as designate guardians to care for your children and oversee their finances until they reach adulthood.
Consider Other Legal Measures to Streamline Property Transfer
Despite having wills and guardianship designations in place, inheritance can become tricky when it gets held up in probate, a costly and time-consuming process. To avoid probate, some people opt for other legal tools such as life estate deeds, which automatically transfer property ownership from one party to another when the original property owner dies. With a life estate, the current owner becomes a life tenant, allowing them to continue using the property until their death. There are many types of deeds, so make sure to pursue the right option.
Set Up a College Savings Fund
With the cost of higher education skyrocketing, it's never too soon to start thinking about setting aside money for your child's eventual college education. Whether you choose a traditional savings account that you dedicate to college savings, make long-term investments for the purpose of funding college education, or opt for one of several college savings programs, there are a variety of options to choose from – meaning you can set up a savings plan that's as flexible or as rigid, as safe or as risky as you choose.
Today's parents worry about a great many things, money being one of the most common concerns. That's why putting sound financial and legal plans in place early is the best way to create a solid financial foundation. Plus, establishing foolproof legal documents and savings strategies eases some of the financial stress that so many families face today, so you can focus your energy on making lasting memories instead of stressing over financial matters.
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