One of the toughest job you have to perform as a parent is to raising a young child. This job will involve most of the time in your daily routine. There is so much you have to do in very short time that you might have ignore the financial life of your child. So, do not underestimate the importance of financial planning in your child’s life. Check out the below given mistakes which you should avoid being young parent.
- Living without an emergency fund – Did you saved enough money to carry out daily expenses and bills ? If not, set up a financial goal and open a savings account to gather emergency funds. Try to deposit minimum of $50 every month. There is a chance of sudden job loss, for both the parents. So, it is advised to save for total expenses for 3 months to 6 months at least. It will buy you enough time to find a new job. It would also help you in the time of crisis like an unexpected home repair or a medical issue.
- Not preparing for the retirement – Most or the parents save money for their kid’s college expenses, but they always ignore the retirement. Do the opposite. If any problem arises, you can opt for a student loan, but you can not borrow money for your retirement days. You must allocate funds from each month’s income for your future days. Choose a 401(k) account if possible. Another option is a Roth IRA or a traditional IRA.
- Not opening a savings account for your child – Open a savings account for your son or daughter. Give him or her a certain amount per month and ask them to deposit that amount into their personal account. By this way you can teach them saving habits which will encourage them to save for future. You can also put a certain amount in a 529 college-savings plan. The fund will be tax-free if it is only used for college expenses.
- Ignoring eligible tax savings – You might be aware of the personal exemption of tax by $3,950 per child, but somehow you missed the opportunity. These deduction will include the child tax credit up to $1,000 (it will be based on your income), child- and dependent-care (coverage given up to 35% of the cost of daycare and day camp), tax credit for adoption (up to $13,190) and tuition fee for special-needy students.
- Not having a health-care “flexible spending account” (FSA) – Most of the big companies allow you to separate some pretax dollars, which you can use to met out-of-pocket medical expenses. For now, this opportunity is given only to 1 in 5 employees. Gather up all your documents like prescription, bills, doctor and dental expenses from the last 12 months, and allocate that amount for enrollment. This step will save your health and medical costs by 20% to 50%.