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Financial Tips for New Parents
If you've just become a parent, you probably feel a strong sense of responsibility that you've never experienced before. In fact, for many couples, having a child can mark the first time that they truly feel like they have entered adulthood. From now on, all your decisions have to be made with the wellbeing of your child in mind. This means you've also got to be smart about money. Even if you've always been reasonably financially responsible, you are probably concerned about making sure that you have enough to comfortably provide for your child. The tips below can help you ensure that your child's financial future is bright.
To begin with, stay calm about money. While it's true that you'll eventually want to be able to pay for everything from piano lessons to soccer team trips to a college education, babies usually don't cost much. There are a lot of accessories that you could buy but few that you genuinely need. Infants need your love and attention, food and a place to sleep, and if you can't afford the fanciest bed or stroller, they'll be none the wiser. Even as your child grows up, love and quality time remain the most valuable things you can give them.
Pay Off Your Debts
Work on paying down your debts while your child is young so that you don't have to worry about them later down the road. In particular, you don't want to still be paying off your own student loans while trying to put your child through college. You can research a student loan consolidation to see if this approach pays off your existing balances sooner. It might also reduce your expenses each month. You could also look into taking out a personal loan to pay off high-interest credit card bills or transfer credit card balances to a lower-interest card.
Your Savings and Investing
Before you start setting up accounts for your children, there are additional steps you should take to get your own finances in a secure place. Your financial stability has to come first as the base from which you can then establish some security for your child. First, you should have an emergency savings account. This will reduce the risk that you'll need to run up your credit cards again. Next, you should be contributing to your own retirement fund. If you have these two things in place, then you can think about opening accounts for your child.
Your Child's Financial Future
Many parents start a 529 savings account for their child's educational expenses. This can be used for college costs, but it can also be used for private K-12 tuition in some states. Some banks offer special accounts for children, such as a savings account. These can offer a great opportunity for you to start teaching your child about money from a young age. If your child gets a part-time job as a teenager, you can open a custodial IRA on their behalf, which allows them to start saving money for retirement. Even small amounts placed in this account throughout their late teens and early 20s can grow to a significant amount over the decades.
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