Wednesday, September 23, 2020

Financially Preparing for Your First Child

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Welcoming a child into the world can be an exciting time, but it can also often be financially overwhelming for new parents. As there are so many factors and variables to having a child, it can often be difficult to determine the exact costs. However, while you may not be able to plan everything, it doesn’t mean that you can’t plan at all. Here are four ways to ensure that you are financially prepared for your first child. 

Reduce Credit Card Debt 

A great way to start clearing up your finances for your first child is to cut down on any credit card debt. This is because it’ll become increasingly more difficult to chip away at debt once you have the added expenses that come with having a child. On top of this, credit cards with thousands in their balance can cost hundreds in annual interest, which you’ll need to save in order to afford the new expenses for your child. 

As the severity of your credit score largely relies on the amount of debt that you have accumulated, it can also get in the way of your chances of buying a home for your growing family. To best tackle debt, consider applying for lower interest rates, trying the snowballing strategy, or researching organizations such as Debt to Success System who can help you tackle your debt with a variety of methods. 

Create a Budget 

Raising a child is one of life’s most rewarding experiences, but it can also come with high costs. To ensure that you and your partner are ready, come up with a realistic budget that includes all of the expenses involved with having a child, such as diapers, toys, food, and general childcare. This will give you an accurate picture of how much you will be spending alongside your usual expenses, and will indicate where you may need to cut back in other areas. You may also want to research affordable nannies or daycare centres in preparation for the future. 

Establish an Emergency Fund

The innately michacious nature of children means that they can be more prone to accidents, so if you don’t have an emergency fund, now is the time to start one. Moreover, without an emergency fund, a potential personal injury or an unexpected job loss could leave you without income to support your child. Before you take on the responsibility of becoming a parent, ensure to set up an emergency fund that covers at least three to nine months worth of expenses - you can determine how much you will need to deposit in your emergency fund by evaluating your budget. 

Review Health and Life Insurance 

Before having a baby, it’s advised to review your health insurance to cover prenatal and newborn care as well as to ensure that there won’t be any unexpected bills. It’s also advised to purchase life insurance to make sure that your family will be financially taken care of in the unlikely event that something happens to you.