How to prepare for parenthood: advice from financial advisors
Becoming a parent is one of the most memorable experiences of your life. It is also one of the most expensive! If you are preparing to become a parent or are already a new parent, it is important to get financial advice from professionals who can help you through this new phase of your life. In this blog post, we’ll discuss some of the things financial advisors recommend for new parents.
Start saving for your child’s education as soon as possible
One of the main financial goals of new parents is to save for their child’s education. Unfortunately, the cost of education is only increasing. According to a report by the National Center for Education Statistics, the average cost of tuition and fees at a four-year private college was $32,410 in 2018-2019. The average cost at a four-year public college was $21,370. And these figures don’t even include room and board!
Saving for your child’s education may seem like an impossible task, but it’s important to start as early as possible. Even if you can only save a small amount, it will accumulate over time.
Open a 529 plan to take advantage of tax relief
A 529 plan is a tax-advantaged savings plan that can be used to pay for eligible educational expenses, such as tuition, tuition, housing, and meals. 529 plans are offered by states and educational institutions, and they are one of the top recommendations from financial advisors for new parents.
One of the biggest benefits of a 529 plan is that you can get tax breaks on your contributions. In some cases, you will even be able to deduct your contributions from your national taxes. Plus, money from a 529 plan grows tax-free, and withdrawals are also tax-free as long as they’re used for qualifying educational expenses.
Make sure you have life insurance in case something happens to one or both parents
Another financial tip for new parents is to make sure you have life insurance. This is especially important if one or both parents are the main breadwinners. If something happened to a parent and they died, life insurance would help protect the family financially.
Most financial advisers recommend that you purchase term life insurance, which is a type of policy that provides coverage for a specific period of time (usually 20 or 30 years). Term life insurance is more affordable than other types of life insurance, such as whole life insurance, and it can be tailored to meet your specific needs.
A trusted direct lender suggests that you purchase life insurance through an independent agent to get the best coverage at the most affordable price. Independent agents are not tied to any insurance company, so they can shop around and find the best policy for you.
Get a head start on retirement savings, especially if one parent is staying home with the baby
Another financial advice from Algernon Ronson of Oak Park Financial for new parents is getting a head start on retirement savings. This is especially important if one parent stays home with the baby and does not work outside the home. In this case, it is even more important to ensure that both parents are saving for retirement.
There are several ways to do this. One option is to open a Roth IRA. A Roth IRA is an individual retirement account that allows you to make after-tax contributions. Money in a Roth IRA grows tax-free, and withdrawals are also tax-free in retirement. Another option is to participate in your employer’s 401(k) plan. If your employer offers matching contributions, be sure to take advantage of this benefit.
Review your budget and make changes if necessary
Finally, financial advisors recommend that new parents review their budget and make changes if necessary. This may include changes to your housing situation, transportation costs and childcare costs.
If you’re not sure where to start, there are a number of online resources that can help you create a budget. You can also work with a financial advisor to create a budget that fits your unique financial situation.
No matter what financial changes you need to make, it’s important to start as soon as possible. The earlier you start, the better prepared you will be to become a parent.