Raising children is expensive, and with the cost of college rising steadily year after year, many parents are now beginning to think about saving for college before their children are even conceived.
But college isn’t the only thing you have to think about: dance lessons, sports, proms, cars, and much more add to the cost of raising kids today, let alone the sheer cost of food, clothing, and school supplies.
It’s no surprise that many working families are living paycheck to paycheck just to provide for their family’s basic needs, let alone plan ahead for the future. Whether you already have children or are thinking about kids in the near future, here are a few ways to start planning to preserve your children’s financial future.
Retirement planning may not seem like it has much impact on your kids, but saving for retirement sets your family up for financial stability long into the future. If your employer matches contributions to your 401(k), take advantage of this benefit.
Choosing your beneficiaries wisely is sound financial planning, as these funds can be used to support your children should something happen to you before they reach adulthood.
Wills and Estate Planning
If you don’t have a will, it’s imperative to put one in place when you become a parent. These legal documents specify things like who inherits your property and other assets when you die, and without a will, there’s no guarantee that your assets will be used to care for your children.
You can also designate a guardian for your children and a guardian to manage their finances (which may or may not be the same person, depending on your preferences).
You should, of course, have a life insurance policy for yourself, but you should also consider taking out a life insurance policy for your children.
Choose a whole life policy with a CSV (cash surrender value), which functions like a guaranteed savings account that accrues interest over time. You can borrow from these life insurance policies without taxation or cash them out for the CSV amount.
Deeds and Trusts
One of the downsides to traditional estate planning is that everything has to go through probate, which is a time-consuming and expensive process. One way to avoid probate in relation to your property is through a life estate deed, which transfers ownership of your property to another specified person(s) automatically upon your death.
If your children are young, you can set up a trust to hold your property and other assets until they reach adulthood, with a guardian appointed to oversee the use of funds to provide for their care in the interim.
Note that there are many types of deeds, so make sure to explore the options.
One of the biggest costs that plague parents’ minds is the rising cost of college education.
While various loan programs and grants make college accessible for most families, many parents would prefer to fund their kids’ college education without leaving them saddled with debt when they graduate.
By starting to save early and taking advantage of programs like 529 College Savings Plans, you can save funds tax-free and even lock in today’s tuition rates with certain savings programs.
One of the best gifts you can give to your children is setting them up for a sound financial future.
Raising children today is expensive, but by taking advantage of legal and financial tools, you can begin to build a foundation that will serve them throughout their lives.
This is a Guest Post written by Jackie Waters… Ms. Waters is a mother of four boys, and lives on a farm in Oregon. She is passionate about providing a healthy and happy home for her family, and aims to provide advice for others on how to do the same with her site Hyper-Tidy.com