Financial Planning for Starting a Family
If you have children or are considering starting a family, you may have started thinking about what that will mean for your finances. Having a baby nowadays is a costly proposition. The average cost of having a baby varies greatly from state to state, but the range for an uncomplicated delivery is between $5,000 and $11,000. If you require a Cesarean section, the range increases to between $7,500 and $14,500.
That cost is not just for the delivery itself. It includes everything that happens during pregnancy, including regular check-ups throughout your pregnancy, pregnancy-related tests, prenatal care, ultrasounds, obstetrician’s fee, anesthesiologist’s fee, hospital care fee, follow-up visit post-delivery, and prescription associated with pregnancy and recovery from childbirth.
And that’s just to bring a child into this world. What about the cost of raising a child? Raising a child can be rewarding emotionally but very costly financially. The average cost of raising a child to age 18 was $233,610 as of 2015. With an annual adjustment for inflation of 2.2 percent each year factored in, the lifetime cost of raising a child born in 2022 could be estimated at $272,049. Those numbers don't include the additional cost of sending a child to college.
All of this is to say that understanding the costs can make shaping your financial plan for starting a family a little easier. Here are some things that will help set your children up for a successful financial future.
1. Set up a college fund
Avoiding a college loan debt, and gaining the security of a college degree will assist them im-measurably. The benefits of opening a 529 College savings account are many, and it will not only ensure a good college education for your kids but also has the added benefit of tax savings and other peripheral benefits.
2. Life Insurance
It’s one thing to consider this as “what will happen to my children if I die?” But it’s something else entirely to think of it in these terms: This is a way to ensure that your children are taken care of, no matter what happens to you.
3. Savings
When it comes to helping kids become financially savvy, teaching them how to save — and why savings are important — is crucial. Talk to your kids about money, financial planning, and why it’s so important. David Beckerman, Senior Vice President of David Lerner Associates says, “Just remember — your kid doesn’t have to be walking yet for you to open a savings account in their name.” Ask your bank about a custodial savings account. Once your child is old enough for an allowance, you can discuss why everyone should have savings and how much to put away. Many experts say saving 20 percent of your income is a good way to build up a safety net.
Another thing you can consider is opening an IRA or even a Crypto investment account, putting away a little money each month, and letting the dividends grow. By the time your kids reach 18, you can gift them with the option of cashing out the money, or keeping it in their name as a beneficiary and continuing to grow the funds over time.
By starting to plan for your children’s future now, they will have a head start and begin to accumulate wealth from a young age.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associ-ates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.