This article was contributed by:
Maria Roberts – Marketing Assistant
Maria is the marketing assistant at SilverSummitHealthPlan. Having several years of experience in the legal field, Maria keeps on sharing her knowledge and expertise with others through the articles.
8 Financial Challenges of Parenthood
Parenting is a rewarding and worthwhile duty. Nonetheless, it is very challenging and, most often, a pocket-draining undertaking. This is since your children will have several needs that you should fulfill for them to become well-equipped adults.
The effects of financial issues, for instance, have a very high impact on parenting. The presence or absence of funds can become one of the major determinants of child-rearing success. Among other factors, too much or too little money creates behavioral extremes and poor quality of childhood experience.
Financial sufficiency or insufficiency can both harbor potential problems that when neglected—may become detrimental. Effects such as easier provision both for physical and emotional needs with sufficient funds; while lack of finances may produce ineffective nurturing and inability to meet basic needs. Incompetence in properly managing finances as parents may also lead children to grow as either too deprived or too comfortable adults.
If you are planning to have your first child or are already would-be parents, you need to make changes to your budget. Your new financial priorities as parents should now include allocations for increased living expenses, as well as new expenses such as childcare or college fund.
8 Major Financial Issues All Parents Need to Face
Whether you like it or not, there will be many financial issues that you need to face as parents. And this is why it’s so important to strategize to dramatically lessen unwanted effects.
If you are planning to stay at home and be a full-time parent, you may not worry much about childcare. But if you have several kids, or you and your partner will go back to work—then you definitely should allot for childcare costs in your budget.
Childcare is the most common and one of the biggest expenditures for parents. Although IRS will offer tax relief when you are a working parent, childcare costs may still range from $4,822 to $22,631 annually.
To address this, try checking if your employer offers dependent care flexible spending accounts, or the child and dependent care credit. These will offset some costs associated with daycare or babysitters. Moreover, to eliminate or limit the need for outside help, see if it’s feasible to have a compressed workweek.
2) Food, diapers, and so forth
The most basic expenditures you’ll have as parents are food, diapers, and the like.
Children will need milk, it is necessary for their survival. Milk, however, can take a sizable part of your budget. Diapers too will take a toll on your funds, with an average possible spending of $263 to $527 a year.
Given that from birth to their adolescents years, your kids will just keep growing. This means that their clothing sizes will change over time, which can happen drastically and too often. And not only that, adding to your costs will be baby gears like the crib, stroller, car seat, etc.
Nevertheless, you can get some of these stuff with hand-me-downs from your family or friends. If you’re not open to this, then look for things that are good quality yet economical and sustainable.
4) Health insurance
Whilst it’s no longer a federal mandate, getting health insurance is a wise decision. Allocating part of your budget for health insurance is important since you should expect for the first few years of parenthood that pediatrician’s visits will be frequent. Adding your child to your employer’s health insurance plan will certainly won’t hurt.
Also consider applying for Medicaid plans, a joint federal-state insurance program. This is especially helpful for low-income individuals. It can provide health coverage for free or at a lower cost.
A studio unit or a one-bedroom apartment may not be the most suitable space to grow a family. New additions to the family require a bigger space to create a balance in your home life. When thinking about parenthood, it pays to plan and allot a portion of your income for housing.
6) Life and disability insurance
The best way to secure your child and spouse—who depends on your paycheck—from a life-threatening illness or fatal accident is to get a life and disability insurance. Uncertainty of premature death or disability can disrupt your family’s way of living. Life and disability insurance will help pay the bills—from mortgage to college fund—for your spouse and children in case of unforeseen situations.
7) College savings
Start building a college fund, now, for your children. This way, you can help your children avoid hefty college loans or help them become debt-free college graduates. Although this will eat a portion of your monthly budget, just like any investment, starting sooner is always better.
8) Unexpected costs
And last, but not least, is to have a savings dedicated to unexpected costs. Having an emergency fund is a necessary failsafe for your family. A good rule of thumb is to save at least six month’s worth of expenses in your bank account.
There will always be financial challenges (as well as unparalleled joy) of becoming a parent. But striving for financial security will help you better prepare yourself on your parenthood journey.