5 Financial Planning Tips for First Time Parents

Business Insights

Having a child can be a challenge; it is one of life’s biggest commitments, but it is also one of the most rewarding experiences that life has to offer too. Unfortunately, children are incredibly expensive, and there is no getting around that, so financial planning is key for parents in general but especially for first-time parents. If you have a baby on the way, then read on for all the tips you need to secure your growing family’s financial future.

Take Out Some Life Insurance

The arrival of a dependent changes things. If something were to happen to you or your partner, would the surviving partner be able to cope financially? There are a lot of costs involved in bringing up a child to adulthood, and without yourself or your partner, the financial burden could become too much. By taking out a life insurance policy, you are making sure that your family will be cared for financially should anything happen to you. There are a lot of different levels of coverage and policy options to choose from, which means that it is really easy to find affordable life insurance options. For example, Bequest has a range of policy options that vary in price, so you should find something to suit.

Start an Emergency Fund

Having some money set aside for a rainy day is always a good idea, no matter your circumstances, but it becomes more important when a child is involved. Most people aim to save between three and six months of living expenses to help them get by just in case something happens and you find yourself out of work for a time, whether due to illness or employment issues. It is also worth considering where you keep your money; a lot of parents opt to keep their emergency fund in a high-interest savings account so that their fund grows while not in use.

Know Your Entitlements

This starts with your maternity and paternity leave entitlement. Often expectant mothers are entitled to more leave, but fathers have rights too, and while you are on leave, you also have rights in regard to your wages from your employers. Pregnant women are also usually entitled to paid time off for prenatal appointments and free prescriptions and dental care. Everyone is entitled to child benefits, although some of it will be taken back in taxes if you earn over a certain amount. Some people on a lower wage are also eligible for Child Tax Credit and Working Tax Credit. Knowing your entitlements and taking advantage of them can really make a difference to your finances.

Implement a Budget

Babies are expensive, and they need many things: a cot, car seat, and a pram, to name but a few. The first year of a baby’s life can be a financial drain. The best thing that you can do is to make a budget. Write a list of everything you need and do your best to stay within budget; you can buy second hand or ask friends family if they have anything you can have. You can also throw a baby shower or gender reveal, and most of the time, you will receive presents that will save you money further down the line. When the baby arrives, make sure you have a monthly budget in place which you can easily stick to. Maternity and paternity pay fluctuates, and you might not come out with the same amount of money each month that you have been used to.

Set Up a Savings Account for Your Child

One of the best things you can do for your child is set up a savings account for them. You can set it up on their behalf and make regular contributions for them. They will be able to access their account when they are older, and they can use that money for whatever they want, as long as you agree, for example, they could use the money for university or to put towards their first car or house depending on how much is in there. It is worth doing a bit of research and shopping around to make sure that you are getting the best deal. Look for savings accounts with higher interest rates. You could also consider a Junior ISA, which protects your accumulated interest from the taxman. However, most children won’t reach the taxable threshold anyway. In most cases, your child won’t be able to access their account until they are eighteen, and the account reverts to a standard ISA.

In Conclusion

The alleged cost of bringing up a child until they turn eighteen is widely disputed, but it is a lot from all reports. Therefore, taking the steps to protect your growing family’s interests makes financial sense. In most cases, the above tips are relatively easy to implement, although most of them do constitute extra expenses; however, with a good budget in place, you will find that it is more within your reach than first thought.