5 common mistakes new parents make
Let’s face it: Children aren’t the only ones who need to be taught proper money habits. Sure, their money plan may be simpler (saving to buy that Barbie or Tonka truck, or buying that Barbie or Tonka truck), but the basic principles of living on less than you make and saving for purchases with cash is something that adults struggle with. And you can’t afford to do that when kids come into the picture.
Here are 5 common mistakes that new parents make, and tips for avoiding them:
Not having a budget – Granted, you don’t need to be a parent to have a spending plan, but money generally gets tighter when you have a baby. One parent may stay home, and there’s an extra person to feed and clothe. The good news is that babies don’t cost as much as society tells you, but the bad news is that not having a budget will still sink you. Write down your income and your expenses before the month begins, agree on it, and stick to it. Your family is depending on it.
Not having life or disability insurance – If you don’t have the right level of insurance, then that baby’s scream is your wake-up call. If something happens to you and you can’t work or breathe anymore, that won’t stop your family’s need to be fed and have the lights kept on. You need 8 to 10 times your income in life insurance and long term disability insurance equal to about 60% of your income. You probably spend more eating out in a week then you’d pay for these insurances in a month, so there’s no excuse not to have it.
Buying life insurance for the baby – this is without a doubt the hardest one to think about, but it is thankfully simple. Don’t get life insurance on your baby. If something happened to him or her, a rider on your life insurance policy would take care of burial expenses. ‘Nuff said.
Saving for college at the expense of retirement – Do your Baby Steps in the right order. Once you’re out of debt and have a full emergency fund, then put 15% of your income into retirement for Baby Step 4. Then and only then do you start funding college. Fight the urge to start saving for the kids until the time is right. Keep something in mind; the difference between college and retirement is that there are other options to help the child get through school. Scholarships, the kids getting a job, going to a cheaper school, etc. What alternative to you have for retirement? Social Security?
Not having a will – stupid, stupid, stupid, stupid. Did we mention it was stupid to not have a will in place for a new parent? Even if you’re not concerned about who gets your money, let’s focus on something else. If you both die without a will that names a guardian for your child, then the courts decide who raises your son or daughter. They don’t care about them as much as you do, so they won’t be as concerned if Billy or Mary goes to live with an irresponsible parent who won’t raise them right. Do you want that future for your child?
Sources: Gazelle Gazette, Kiplinger.com
Entry filed under: Budgeting, College Planning, Insurance, Kids, Retirement, Will and Estate Planning. Tags: Budgeting, college savings, disability insurance, finances, financial plan, life insurance, Money-wise, Retirement, will.