Part 2 in the Life Happens series.
Bringing a new child into your family holds many promises for the future. It’s a time to celebrate, but it can also change the way you manage money. From daycare to future college costs, raising a child is rewarding but expensive.
With your family’s new immediate needs, you might be tempted to pull back on your long-term savings goals. Don’t do that; the future will be here before you know it. In the meantime, keep perspective.
- Remember your future
Your future security will benefit your children in the long-run. By saving enough for your retirement, you have a better chance of not needing to depend on them later. And if you continue to save, you have more opportunity to grow your nest egg.
- Save for emergencies
Kids come with all kinds of unexpected expenses. Build an emergency fund to cover them by saving enough to cover at least six to 12 months of expenses.
- Get creative for college
There’s more than one way to pay for college, such as financial aid, grants and scholarships. Having a plan for this expense is one of your few best bets for success. A Sallie Mae survey found that 61 percent of families who had a plan were completely confident about their financial decisions, while only 41 percent of non-planners felt the same.
One thought to keep in mind: scaling back on retirement savings to pay for college expenses might not add up. Sixty percent of parents of high school students say they are prepared to take this approach. However, that’s usually not the best course of action. Reducing your retirement savings now could mean you have to rely on your children for financial support in the future if you don’t have enough to make it on your own.
Your family life may be changing, but staying focused on long-term goals should not. Ideally, all your goals—retirement, college, emergency savings—should be part of your overall financial plan.
Identifying your goals is the first step. Take the next step to define your investing profile and the asset mix right for you.
Read the full Life Happens series: