Having kids can be expensive, and if you are having them later in life, it is especially important to take a step back and consider your financial situation. But even if your income has stabilized and you have a great career, it is critical to ensure you are taking the right steps to ensure your kids’ futures will be taken care of.
Consider Life Insurance
It’s a good idea to have a life insurance policy when you have kids, no matter how old you are. The right type of policy can differ depending on your financial goals and the age of your kids. For example, if you want simple coverage, consider term life. On the other hand, if you want a financial savings vehicle, consider going for a policy that has a cash value component. If you currently have a policy, you may find it no longer suits your needs as a parent. The good news is you can easily cash it out through a life settlement. Then you can use the funds to buy a policy that better fits your current situation. A life settlement is a good option when you are a senior in need of cash as well. If you think this might be the right option for you, you can review this guide to evaluate companies that may be able to help.
Set Up an Emergency Fund
Emergencies can happen at any age, and no matter where you are in your finances, it’s a good idea to have an emergency fund set up. This money should be set aside to be used only for emergencies. Have around six months or more of living expenses set aside. If there are hospital bills, car repairs, or other expenses, your fund will help you cover them. This will prevent you from having to go into debt during an emergency expense. Instead of charging these things to a credit card, you can simply dip into this account.
Determining Your Income
It’s important to have stable income when you have kids. It can be variable from month to month, but overall, you should know you are able to bring in an average income that is comfortable to live off of. When you are self-employed, your income is more likely to fluctuate. However, having an emergency fund in place can help mitigate the effects of a varying income. Even if you have a full-time job at a company, you could be fired or laid off for any number of reasons. That’s especially true if you work at a smaller company. Still, you will know if you have a stable income or not. Most people know when they are valued by their companies and if they are likely to stay employed there. If you currently do not have reliable income, it’s important to get there before you have kids.
Creating a Will
Setting up your will or ensuring your existing one is updated is an important step in making sure your kids will be taken care of if you pass away. And older parents should especially consider setting up a will as soon as possible. That’s not only because you are more likely to have health problems or pass away suddenly. But you also may have more assets than you did in the past, such as a home, different financial products, vehicles, and other things. Consider appointing a legal guardian to take care of your kids and name this guardian in your will. You should also ensure your kids are beneficiaries of any financial products, such as investments and insurance.
If you have kids, you are more likely to stay in the workforce longer than someone whose kids are grown by the time they are ready to retire. Staying in the workforce longer gives you a bit more time to save up and provide for the kids. You don’t have to work through your 60s or 70s, but if you do stay in the workforce longer, you can avoid taking such a big financial hit by retiring, and you can help the kids pay for school. In fact, working longer, even if it’s part-time, can help you stay healthier and happier during your golden years. Being busy can give you a sense of purpose that can be lacking for those who don’t have anything to keep them occupied. Still, don’t delay saving for retirement in case health issues force you to stop working sooner than you had thought.
Taking Care of Debt
No one is immune to the effects of debt, but ensure you stay on top of your bills and don’t get into any once you have kids. Even the first year after having kids can be challenging because of all the items you need to purchase. If you have friends willing to throw you a baby shower, you may not have to face all these expenses. If you are in debt when you are younger, you still have some time to get back to an ideal financial situation. Still, when you are older, you don’t have as much time to correct financial challenges. Don’t be tempted to dip into your retirement money too early.
Consider Your Time
If you currently work a lot of hours or have a side hustle to pay the bills, you are likely used to being in control of how much time you devote to work. And with limited free time, you likely have specific ways you want to relax. However, when you become a parent, you will not have as much free time available. And if you are having kids later in life, this can be an even bigger adjustment. It’s a good idea to let go of the idea that you are always in control because having kids can completely change your plans. Be ready to lose some sleep and know that your plans will need to revolve around your kids, not yourself or your work life. If you can, consider taking a job that offers some flexibility.