Today’s guest post is by Jackie Waters, author of Hyper-Tidy.com.
Financial life planning as you build a family can get complicated. You not only have to cover the basics in your day-to-day lives, but you have to look ahead and consider investment and saving strategies to ensure that your children are taken care of if you become ill or pass away. Investing can be done in a variety of ways, but parents would be wise to pursue smart strategies that will keep their assets safe and secure.
Focus on saving for emergencies ahead of investing.
Of course, every parent knows that they should work on saving money, but 360 Financial Literacy points out that saving and investing are different and that it is important to do both. Many families put off developing an investment plan, and this can leave them struggling down the road. Even if your income is moderate, you should start investing as soon as you can. Savings will help cover your needs, but your savings won’t grow over time as much as investing typically will.
The Balance explains that saving money is important and these savings should be held in ways that keep them available to you should an emergency arise. A basic savings account is one option, but you may also look to utilize United States Treasury bills or some types of money market accounts.
How much do you need to stash away in savings? Business Insider notes that rather than a specific amount, you should think of your savings in terms of how many months of expenses it could cover. Three months’ worth of expenses is the minimum most families should aim to save, but six months’ worth is safer.
Investing early on can produce a hefty nest egg down the road.
On top of saving for emergencies, you will want to start investing as soon as you can too. The money you invest early on will grow significantly due to interest compounding over the years, shares Investopedia, and you can take bigger risks that result in potentially bigger rewards by starting early as well.
There are plenty of ways to get started with investing, but one of the simplest and most recommended is to utilize a 401(k) or similar type of plan if it is offered by your employer. Many employers match a certain percentage of your contributions and this is an easy way to start building a nest egg. These types of investment accounts also provide some helpful tax breaks that will lower your tax liability.
Some people like to manage their investments day-to-day on their own, but this is a place where paying a professional may well be worth the cost. NerdWallet shares that a financial expert can provide crucial guidance and insight when it comes to investing, and there are different pricing options available that are worth exploring.
There is a place for saving for a child’s college education too.
What about saving for college for your children? This is an important consideration for many parents, and this is another area where starting early can make a significant difference. However, many experts recommend focusing on saving for retirement first and saving for college second.
As financial advisor Dave Ramsey explains, families can often utilize other resources to pay for college such as loans, part-time jobs, scholarships, and grants. Families can also turn to less expensive colleges, community colleges, or trade schools for some education, whereas retirement is far less flexible in terms of needs or resources. If you are in a position to start saving for your child’s college, look into utilizing a 529 plan or Education Savings Account.
Life planning in relation to protecting your children covers a lot of topics. For example, you need to do some estate planning, perhaps utilizing a quitclaim deed to ensure a smooth transfer of property to your children in the event of your death.
You also need to consider both short-term and long-term needs, including saving as well as investing for retirement and a child’s college education. It is challenging to find the right mix of strategies regarding saving and investing, but careful planning early on can have a big impact on your family’s security down the road.
If you’re not sure where to begin, a simple way to start is by reaching out to seek the advice of a financial planner. Try going by word of mouth through friends or relatives to find an investment planner, and then make an appointment to discuss your concerns and plans for the future. Talking to someone with a financial planning background can be the best way to put together a road map for a successful financial future and will ensure your children are taken care of if something ever happens to you.
Jackie started Hyper-Tidy.com to share what she has learned over more than a decade of striving for cleanliness and sustainability. She has 4 boys, and they all live in their farm in Oregon. Her day is kept busy with balancing house chores, mom-duties, and farm-duties. On good days, she’s able to come up with healthy ideas or reorganizing ideas along the way.
[Image via Pixabay]