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Money and Children

Four money concerns that crop up when kids enter the picture.

Baby, future, hope

When you introduce children into your relationship, money concerns often take some drastic detours. For example, children come with expenses that you didn’t have before. From diapers to college tuition, those expenses seem to grow over time. So when children arrive, your vision of the future begins to change.

You Become a Financial Role Model

With children around, you’re a financial role model. Children of all ages watch how you save, spend, and allocate funds, and they are likely to repeat some of that behavior as they grow. While getting in over your head with debt or failing to save money is never a good plan, you certainly don’t want to model behavior that encourages your child to make poor financial decisions later in life. 

An Increased Need for Savings

Before children, couples often save for big expenses such as a home or vacation. Some couples plan for children and start saving in advance; for others, the addition of children can be a surprise. However your family grows, additional people means more savings requirements. Your vacation might be more expensive with children, and you’ll also need to save for school trips, band instruments, sporting equipment, first cars, insurance payments, and college—and that’s just a short list highlighting expenses associated with raising a child!

Emergency Funds Become Critical

Besides a long-term savings account, everyone needs a small emergency savings. Most experts recommend that you tuck away $1,000 or more for sudden emergencies such as a broken air conditioner or, worse, a broken bone. Children make this fund more critical: two adults might be able to grin and bear 95-degree weather until the next paycheck arrives, but with an infant or toddler in the house, heat becomes a serious health concern.

Updating Benefits and Insurance Policies

Spending and saving aren’t the only financial concerns for parents. When a baby comes along, it’s time to update any benefits, insurance policies, or estate plans. For many parents, the arrival of the first child sparks estate planning and insurance policies. First, make sure you add your child to applicable health benefit plans; if you don’t have insurance or think you can’t afford it, each state has options through Medicaid and other affordable plans. Second, make provisions for your child’s future by adding him or her as a beneficiary on life insurance policies and trusts, and select a trusted individual to manage assets for your minor children if you pass away before they are old enough to do so themselves.

Money matters aren’t something most couples want to think about on a regular basis, and no one wants to the have the discussion about what happens to children if a tragedy occurs. Making plans now, even if it is an unpleasant task, can help you approach finances and the future with boldness and peace of mind.