Being a parent is not an easy task. You're expected to juggle responsibilities one after another. And, fulfilling as it is, doing this can be both exhausting and costly.
This holds especially true if you're already finding it challenging to manage existing household expenses.
And with inflation and economic challenges ramping up living expenses, saving cash for the future seems like an impossible challenge.
Regardless of these external variables, you have to provide the best future for your children while allowing them to live a comfortable daily life. Being strapped for time and money is not an excuse to be complacent about parenthood.
If you want to ensure financial security for your family for years to come, you've come to the right place. This article will delve into eight habits and strategies you can apply to ensure your family's happy and prosperous financial future.
Let's jump straight into it!
1. Formulate Your Long-Term Financial Plan
We all are aware of the positives of saving for a rainy day. And while it's great to have a financial cushion set aside for the future, it's always best to have a big-picture plan that drives this act.
For instance, if you're expecting to have multiple kids in the future, then you should shape your financial goals to accommodate this plan.
One straightforward but effective goal you can consider is to increase your savings percentage year-on-year.
Alternatively, you can set a goal of creating at least two passive income streams, like purchasing rental apartments or putting up a vending machine in places with high foot traffic.
If you're starting your financial planning journey from scratch, you can't go wrong with applying the 50-30-20 budget rule to start. This page also helps you see the ideal savings figure you should have per age.
In the 50-30-20 rule, you allocate 20% of your monthly income to savings and investments. This figure is of course variable depending on what works best for your family.
Your financial strategy is ultimately a personal choice based on your capital and set of circumstances.
However, having one is the difference maker from an aimless wanderer to a sharp budget-savvy individual.
2. Build A Milestone Fund
Raising a kid entails quite a fair amount of expenses, from buying infant clothes and accessories to paying for their school fees and tuition.
The good news is that parents can plan for these expenses and set aside some cash to cover them.
A high-interest bank account (one separate from your personal one) is a good place to park these funds before they get utilized. You can start slowly depositing a portion of your monthly income into it as soon as you can.
A good benchmark is two to three years in advance, but sooner is better.
High-interest accounts or time deposits are ideal funds because they offer good interest rates, allowing you to increase your cash value over time.
By building a milestone fund, you can forecast future expenses and prepare the costs of child-rearing well in advance. In turn, this can help you more smoothly navigate parenthood with fewer financial surprises.
3. Set Up a Bank Account For Your Child
Setting up a bank account is a fairly easy and quick thing to accomplish. It can be done online or over the counter. Having one meant for your child specifically can be a great way to establish their name in financial institutions and secure their future later in life.
But beyond that, a bank account also helps create a separation between your finances and theirs, which can help instill a sense of discipline in your child. It's also useful for storing gift money meant for your child that has come from relatives and friends.
4. Get Health Insurance
It's easy to underestimate the importance of health insurance when you've gone through years of paying for it without issue. However, the peace of mind provided by it and the financial safety net are of vital importance for busy parents.
Without ample insurance, all it takes is one accident or health condition to drain your bank account and lead you to a world of spiralling debt.
As such, be sure to get health insurance for every member of your family, notably your spouse and children.
5. Educate Your Children About Finances
Protecting your household's financial well-being doesn't have to be a one-person team. The more people in your household who uphold the same financial values as you, the better.
In fact, getting your children and spouse into the habit can bolster your savings significantly over time. And in order to do so, you should consider educating them on why and how they can save up.
For starters, be age-appropriate in your approach. You don't want to teach a toddler about financial jargon that'll fly over their heads. Start by explaining money's scarcity and how saving up money can lead to better results in the long run.
You can give them things like a piggy bank to help them put theory into practice. Furthermore, be sure to uphold your own teachings as well.
When your young ones see you carry out money-saving practices, they'll feel more committed to doing the same as well--which can be beneficial for your family savings in the long run.
6. Diversify Your Investments
As the famous adage goes, don't put all your eggs in one basket. And for busy parents who may not have the time to check the stock market every so often, this philosophy can't be any more true.
Putting a large portion of your capital into a single stock investment can put you at risk of large losses if the industry or company fails to achieve success.
Conversely, putting all your money into slow index funds is generally effective in growing funds in the long term, but it also hinders your capital growth potential.
To get the best of both worlds, diversification is key. Invest in multiple high-potential industries, investment types, and companies. This will help mitigate the risk of bad stocks weighing your portfolio down, which can lead to better returns in the long run.
7. Dedicate An Account For Emergencies
Building an emergency fund is necessary to control any unstable or volatile moments you may face in your life.
Whether it's a sudden job loss, a medical emergency, or an urgent need for funds, having a dedicated emergency fund can help you resolve the need for a quick injection of cash at once.
Ideally, you should build this fund as soon as you can. The amount here should be equivalent to at least six times your monthly income.
An emergency fund can spell the difference between insurmountable debt and a second chance. This is why, after clearing off debts, you should focus your efforts on building one in case undesirable events occur.
8. Set up Automatic Transfers in Banks
If discipline isn't your strong suit, then you can set up an automatic money transfer to deliver a portion of your funds to a separate account from your personal account.
You can do this in two ways: you can ask your banking provider to do this for you, particularly through an agent. Alternatively, you can ask your employer to do this on their end.
Setting up an automatic transfer helps you maintain discipline with your funds with little maintenance on your part. This, in turn, can help you achieve your financial goals at a more controlled pace.
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