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By Donna Johnson
Special to the Financial Independence Hub
One of the most exciting events in most people’s lives is becoming a parent. Those who are currently bringing new kids into the world tend to fall into the Millennial generation, which includes people born between 1981 and 1996. These parents need to be prepared for many things they may not be ready for. Having a home security system is a good idea, but there are also many other financial considerations to take into account.
Kids are expensive
The cost of raising a kid is now estimated to be around US$233,000. That’s just until they are 18. Therefore, Millennial parents can expect to pay more than $12,000 per year for their little bundles of joy. Of course, there are ways to avoid some of these costs, like skipping out on day care costs by having one parent stay home until the child goes to school and buying clothes at thrift stores. Additionally, family members like grandparents might be willing to watch kids for a reduced fee, if they charge anything at all. Regardless, there are costs that come with having a child, and new parents should be prepared for them.
It’s important to get your documents together
Many parents fail to adequately prepare for the future. No one wants to die before their kids reach adulthood. However, there is always that possibility. Therefore, taking out a solid life insurance policy is a good idea. Also, setting up a will that indicates where the kids should go in the event that both parents die or become incapacitated will help ensure that the children stay out of the foster system.
College is coming up
Those who have a child this year will likely have between 18 and 19 years to get ready for college expenses. As of 2018, a year at a public four-year school at the in-state tuition rate averaged US$20,770, while a year at a private school costs just under US$47,000.
There are ways to cut this cost through scholarships and grants, but this cost will likely go up by the time this year’s newborns hit their parents’ alma maters. Saving a bit from the beginning is a good way to take care of some of these expenses.
Keep up Retirement savings
Millennials do not have the advantages that many Baby Boomers had when it comes to retirement. Gone are the days of the company pension. Today, most private companies offer a 401(k) plan if they offer any retirement savings options at all. The median retirement savings for Millennials is US$36,000. This means that half of future retirees from the Millennial generation have less socked away for their golden years. Many have nothing at all stashed.
It may seem difficult, but now is the time to keep up with retirement savings. Sure, it might be possible to save more in the future, but because of compounding, every dollar saved today will be worth more than those saved after the kids are out of the house. Kids can borrow for houses and college, but retirees will have trouble borrowing money to pay for their retirements. Therefore, it’s a good idea to save now, rather than later.
Keep up an Emergency Fund
Having an emergency fund of three to six months of expenses is a common refrain that personal finance recommend. This will likely mean new parents will want to have anywhere between US$6,000 to $20,000 or more saved up when their little bundles of joy shows up. Some will need even more. The math is simple, but getting the funds together can be a challenge.
Most people love new babies. Parents need to be prepared for their arrival. Keeping these ideas in mind can provide a head start for new parents.
My name is Donna Jo and I am from Birmingham, Alabama. I love sports (especially softball) and I’m a home security guru. After working many years for a home security company I decided to pursue my lifelong dream of being a writer. That’s what has brought me here today. I hope y’all enjoy my content!
