Mid Penn Bancorp Inc.

09/15/2021 | News release | Distributed by Public on 09/15/2021 07:21

Financial Planning Advice for Families

Financial Planning Advice for Families

Posted on Sep 15th, 2021

As you go through life, your financial needs will evolve. Your expenses and income will change from when you are single to when you're in a long-term relationship or married. If you decide to have children, your financial needs will change again. As your children get older, you'll see other changes in your family's financial situation. You may not know those exact needs until they arise, but you can make plans and be prepared.

With careful considerations, you can plan your finances and prepare yourself, your partner and your children for life events and milestones. No matter what stage you and your family are in, here's how to put together a financial plan.

Why Is Financial Planning Important?

If you have goals you want to reach, you'llneed a plan to attain those goals. You might have goals when it comes to family matters, such as getting married or having children. Family-related goals usually involve a financial element. You may want to have a certain amount saved before you get married, or you might want to have money to pay for the wedding itself. Maybe you want to save toward purchasing a home. If you start having children, you might want to have a financial cushion to cover medical care or educational costs. What does retirement look like for you? Will you want to continue working in some fashion? Knowing how much you will need to save to retire comfortably and be financially secure is best determined early on.

While your financial plan will likely shift as time goes on, having one in place helps keep you prepared. Some important reasons why having a family financial plan in place include:

  • It helps you set goals: Your financial plan can give you something to work toward, no matter your desires. You may wish to save for a wedding, save for a down payment on a home or prepare to have a new child. Your plan can also help you see if your goals are realistic. With a plan, you can make changes to your financial situation as your family status changes. Your new goals may involve finding a job that pays more or moving to an area with a lower cost of living.
  • It gives you a roadmap to follow: Having a financial plan takes a lot of the guesswork out of navigating your way through life. With a plan in place, you can save what you need each month. You can also determine what you should spend on various needs and extras.
  • It shows you detours if obstacles get in the way: Life can be complicated and doesn't always go as planned. Your financial plan can show you ways to work around issues that might come up, such as injury, illness or job loss. With a plan in place, you can calmly assess the situation and decide what to do if the unexpected happens. You're more likely to maintain your home and your livelihood if you have a financial plan to follow.

The Benefits of Financial Planning for Families

Creating a financial plan does more than help get your money in order and prepare you for the future. It also gives you and your loved ones some emotional and social benefits. No matter where you are in life or what stage your family is in, there are advantages to having a financial plan:

  • You can live the life you want to live: A financial plan helps you shape your life and make it what you and your partner want. If you dream of living in a particular location, your plan can focus on saving enough to afford a down payment on a home in that area. You can also look at how you imagine your future and use your plan to help you get there. Maybe you want to travel or live abroad, adopt children or spend time volunteering.
  • You get peace of mind: Creating a financial plan can help ease your worries about what might happen under certain circumstances. Building up your savings and assets should ideally be part of your plan. Having a financial cushion and an idea of the steps you could take if an emergency happens can ease your stress.
  • You get flexibility: Life can be surprising, and what you might want as a 25-year-old might not be what you want at 35. Plan monitoring allows you to adjust your plans as your needs change. Some goals may be best suited for a money market or savings account, others may involve other financial products or services.
  • You can feel confident in your decisions: There will be times in your life when you wonder if you made the right choice, particularly when it comes to milestones or major life decisions. Make a financial plan to feel more confident that the choices you and your partner make are the best ones for your family at the moment.

Family Financial Planning Guide for Different Life Stages

Depending on what you want from life, you might find yourself facing money questions at several distinct stages. Take a look at how you can navigate financial situations and make a plan for your money when you reach certain milestones.

1. Getting Married

You and your partner have decided to get married. Ideally, you'll go into your marriage with a clear idea of each other's financial situations. It also helps to have shared goals and a commitment to open and honest communication about money matters. Here are some things to consider when making your financial plan as soon-to-be-married people or newlyweds:

  • Talking about your finances: The money conversation can be a major moment in a couple's relationship. One person shouldn't spring the discussion on the other without giving them time to prepare. When discussing your financial situation, take a multi-pronged approach. Talk about your incomes, debts you have, your savings and investments and your financial hopes or goals.
  • Handling debt: One or both of you may have debts, such as student loans or credit card debt. You want to work together to figure out how you'll tackle existing debt. Will you work to pay it off before you combine finances and get married? Or are you both okay with the other person bringing debt into the relationship? If one person has more savings or a higher income than the other, would they be willing to help their partner pay down individual debt?
  • Combining money: Do you and your partner want to combine your money, keep separate accounts, or use a combination of joint and separate accounts? Some couples find it worthwhile to create a prenuptial agreement that describes how things will get divided up if you share accounts and the marriage doesn't work out.
  • Making a budget: Once you've determined how to handle household income, it's time to create a the budget. List your expenses for each month and your income, then decide how you'll pay for everything. If you're keeping finances separate, you might each decide to pay for shared expenses based on your income or using an equal split.
  • Paying for the wedding: It's helpful if you and your partner are on the same page regarding the cost of the wedding and who will pay for what. Whether you decide to have a big celebration or a small, private event, discuss who will cover what costs and set a budget based on your means.
  • Setting goals as a couple: Ideally, you and your spouse will have similar financial goals. You may both want to save for a down payment on a home or work to pay off your student loans together. Your financial plan should start with at least one goal and a detailed description of what you'll do to reach that goal.

2. Having a Baby

After getting married, your next major step in life might be having a child. Your plan can help you determine how you'll pay for the cost of delivery or adoption as well as the items a new family member needs. Create a financial plan for having a baby by factoring in:

  • Paying for the delivery: The cost of delivering a baby varies considerably depending on your health insurance, location and delivery type. In Pennsylvania, the average family spends $13,000 per birth. Before you start trying to get pregnant, it can be a good idea to review your health insurance coverage. You might want to change policies during the next open enrollment period if your current policy doesn't provide adequate coverage.
  • Paying adoption costs: If you adopt a child, the cost can vary depending on how you go about the adoption process. Working with an adoption agency is usually the most expensive option and can cost tens of thousands of dollars. Adopting from foster care often has no fees.
  • Affording parental leave: Both parents can take up to 12 weeks of leave under the Family and Medical Leave Act. Whether that leave is paid or not depends on your employer. If your employer doesn't offer paid leave, you might need to start saving to afford to take time off and be with your new child. As you make a plan, look for expenses to trim or other ways to boost your savings. You can then have enough set aside to cover costs while you or your partner are taking time off from work.
  • Paying for baby needs: Compared to older children, babies and toddlers are less expensive. The average family spends around $300 less per year on children under age 2 than those with older children. Friends or relatives with children might be happy to give you hand-me-down strollers and clothing. Thrift stores and consignment shops are also good places to find relatively affordable baby gear.

3. Having School-Aged Children

As your children get older, they get more expensive. Not counting college costs, the average family will spend $233,610 raising a child from birth to age 17, or around $12,980 per year. Some of the costs of having school-aged children or teenagers include:

  • Health insurance: Your children might be covered under your health insurance plan. Depending on your family income, they might be covered by a state insurance program, such as the Children's Health Insurance Program (CHIP). Kids can be accident-prone or get sick, so it might be a good idea to increase your savings for medical care. You can then cover the cost of annual deductibles or out-of-pocket medical expenses.
  • Clothing:Until they are older teenagers, children seem to go through clothing quickly. They outgrow it or get it so dirty it's no longer wearable. Including clothing costs as a budget item will help you plan for the added expense. You can also find ways to reduce the cost of kids' clothes. Arrange clothing swaps with other parents or get secondhand clothes for your kids.
  • Food: After housing, food is the second biggest expense related to having kids, making up 18% of annual childcare costs. Older children, particularly teenagers, tend to eat more than younger kids, meaning higher expenses.
  • Education: Education, including daycare, is the third largest expense connected to having children. Even if you plan on sending your children to public school, there may still be costs of uniforms, extracurricular activities and school trips to consider. You might adjust your budget to shift some expenses away from you and your partner to cover your children's educational needs.

4. Sending Children to College

Post-secondary education is more expensive than ever. It's never too early to start thinking about how you'll pay for college, should they decide to go. You can start contributing to a college savings account, such as a 529 plan, from the day your child is born or you adopt them. Once your children are at college, you might make adjustments to your spending to cover the cost of tuition or their room and board.

Don't forget that your children can help pay for their college costs. When they are in high school, you might encourage them to find a part-time job over the summer or on weekends so they can save a bit to pay for school. Having your kids contribute to their education costs in some way can help them value their education more. It also allows you to teach them money management and budgeting skills from a young age.

Family Financial Planning Tips for Future Life Events

Along with helping you get prepared for marriage, having kids and sending your children to college, financial planning offers a holistic approach to your life and money. Some elements that should be part of your broad financial plan include:

  • Life insurance: Although you might not want to think about it, it's important to have some protection if you or your spouse dies. A life insurance policy can make up the income lost after a spouse or parent dies, protecting the surviving partner and their children. It can be used to pay off debt or fulfill financial goals that haven't been reached. Life insurance is also typically used to cover final expenses and medical bills.
  • Retirement savings: No matter how many children you have, remember to save for retirement while saving for their education and paying day-to-day expenses. When you are younger, time is on your side when it comes to retirement savings. The sooner you start putting money aside, the longer it will have to grow so you can live comfortably after you retire. The longer you wait to begin saving, the more you have to save because of the loss of compounding growth.
  • Estate planning: An estate plan or will gives you a say in what happens to your money and assets after your death. Without a will, your estate will be distributed based on laws already established by the state you lived in and will not account for any of your goals or wishes that were not written down in a formal document.

Mid Penn Bank Can Help You Make a Financial Plan for Your Family

Mid Penn Bank is here for you. We offer wealth management and financial planning to help you prepare for your life and future. We also have savings accounts, checking accounts and mortgages to help you handle your day-to-day finances. To learn more, contact us today.

Disclosures

The material on this site was created for educational purposes. It is not intended to be and should not be treated as legal, tax, investment, accounting, or other professional advice.

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