Family Money
Navigating Family Finances: A Blueprint for Success
The cost to raise a single child in the United States has skyrocketed. According to the most recent statistics available, parents of a child born in 2015 will spend an estimated $233,610 to raise one son or daughter from birth until they reach age 18. This includes just basic living expenses but excludes college. Putting this into perspective, the costs of raising previous recent generations -- adjusted for inflation -- to raise a child in the 1950s averaged $2,500 to $3,000 and at the turn of the Millenium, just over two decades ago, that price per child had increased to $10,000 to $13,000 (adjusted for inflation).
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For certain, for today's moms and dads, raising children is as rewarding an undertaking as it's always been. However, the reality is a modern day family also comes with a hefty price tag and there's no sign of escalating costs slowing down anytime soon.
Though expenses of raising a family may seem daunting, there are crucial steps parents might consider taking to maximize the chances of ensuring their entire family's financial security as well as setting each child up for a successful future.
6 Essential Family Money Strategies
Beyond the basics such as housing and food, when thinking about your family budget, here are some things which are all equally important, which you may not have considered before.
Life Insurance Coverage
Even before your first child is born, securing cheap term life insurance is an imperative first step in protecting your family's financial stability. A comprehensive life insurance policy, ideally one that does not require a medical exam to set up, should cover both parents until the child reaches at least 18 years old. This ensures that, in the unfortunate event of a parent's passing, there is an adequate safety net to cover expenses and provide for your child's/children's needs a least until they reach adulthood and can potentially support themselves.
Interest-Bearing Bank Accounts, Investments
One of the next approaches parents should consider taking is to establish an interest-bearing account or invest in Certificates of Deposit (CDs) and other long-term investments with the highest yield possible. U.S. Savings Bonds are another way to securely invest money for your child's future. These accounts provide a solid foundation for your child's financial outlook in the years ahead. By starting early, you can take advantage of compound interest, allowing your money to grow over time.
Financial Literacy and Budgeting
Teaching children financial literary, to manage money effectively is a lifelong gift. This is especially true considering that as of 2023, Americans are collectively facing a personal credit card debt of more than $1 trillion. By setting a positive example and involving them in age-appropriate discussions about family finances, you empower them with valuable life skills. Encourage them to save a portion of their allowance, budget for discretionary spending, and understand the importance of financial responsibility. For older children and teens, there are apps to help parents teach kids about banking and investing.
College 529 Scholarship Plan
With costs continuing to rise exponentially, investing in education and starting to save for college as early as at birth, is one of the greatest gifts you can give your child. Something you might not know much about is a College 529 plan. This is a tax-advantaged savings account designed specifically for future educational expenses which both you and other family members can gift funds towards. By contributing regularly and adding this line item to your monthly budget, you can build a substantial fund to cover tuition, books, and other educational costs. This forward-thinking approach can alleviate the burden of student loans in your child's future.
Comprehensive Health Insurance
Adequate healthcare coverage is a non-negotiable aspect of family finances. Health, dental, and orthodontics insurance policies provide essential protection against unexpected medical expenses which could otherwise potentially bankrupt you. Accidents and injuries requiring medical attention can and do happen to kids, so the odds are against you if you try and manage without any insurance. By addressing potential health concerns and taking them seriously through ensuring you maintain adequate health insurance, you can save significant amounts of out of pocket expenses in the long run.
Strategic Daily Shopping Strategies
Saving money on everyday necessities is another often overlooked aspect of family finances. By employing savvy shopping techniques such as hunting for sales, comparison shopping, and using discount codes for online purchases, you can significantly stretch your budget, freeing up money to fund your child's future. Every dollar saved is an investment in your family's collective and individual financial security.
Start Saving for Your Child's Future Today
In an era where the cost of living continues to rise, taking proactive steps to secure your family's financial future is paramount. From seeking out the cheapest term life insurance possible to saving for college early, to making smart money decisions and teaching kids about money, by diligently implementing these six strategies, you not only safeguard your family's present well-being but also lay the groundwork for a prosperous future for each child.
Remember, the journey of parenthood is not just about providing for immediate needs and living for tomorrow and the short-term future. It's also about equipping your children with the tools, skills, and knowledge to thrive in their financial lives. With careful planning and thoughtful execution, you can navigate the complexities of family finances with confidence and create a legacy of financial security for your children, grandchildren and generations to come.