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Financial Planning Strategies for Each Stage of Your Child’s Life

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    Financial Planning Strategies for Each Stage of Your Child’s Life

    Financial Planning Strategies for Each Stage of Your Child's Life

    In the United States, the average family spends more than $233,000 raising a child from birth through age 17. That works out to about $13,000 per year. While some of the costs of having children come in the first few years of their lives, such as the cost of labor and delivery, formula, and baby gear, many expenses associated with raising children occur as they get older. Those costs include clothing, school activities, and driving once they become teenagers.

    Understanding financial planning for parents can help you cover the expenses needed to give them a great start in life. It also allows you to teach your kids about the importance of financial planning. Having several financial strategies ensures you have enough saved for your children’s future and your own.

    Why Is It Important to Start Financial Planning Early?

    Life can be full of surprises, and even though you might not know exactly what it’s going to throw your way, it can be helpful to make a plan to help you weather a variety of storms. Financial planning for the family from an early phase also helps you pass on financial guidance and wisdom to your children. Kids learn by example, so if they see you saving and planning for the future, they’ll be more likely to adopt those habits.

    Financial planning can start even before you have children. When you’re in the early stages of family planning, adding a “baby stuff” line item to your budget is a good idea. Having money set aside before your kids are born means you’ll have a cushion in place in case you have an unexpected expense or your child needs medical treatment beyond preventative care.

    As your children get older, the cost of raising them is likely to go up. Once your kid is old enough to participate in activities, you can anticipate having to pay for them to join a sports team, go to dance class, or learn the piano, for example. The cost of food and clothing also goes up as your children get older and bigger.

    Having a nest egg in place for your kids’ expenses will help you cover costs. Being in the habit of budgeting will help you be prepared to say yes or no when your child asks to enroll in a new activity or buy a new video game. Early financial planning also helps you prepare for the most considerable child-related expense of all — college. The earlier you start saving for your child’s post-secondary education, the more freedom they’ll have when choosing which school to attend.

    7 Financial Planning Strategies for Children in K-12

    If you have school-aged kids, you can do several things to invest in their future and give them a solid financial start. Here are some tips for financial planning for your child’s future:

    1. Create a Household Budget

    When putting together any financial strategy or plan, the first step is creating a budget. A budget is a spending plan based on your earnings and expenses. It lets you set financial goals and helps you see if you have enough money to cover the cost of everything you need or want to buy.

    You have many options for budgeting. The 50/30/20 budget is often recommended for budgeting beginners. With the 50/30/20 budget, you set aside 50% of your after-tax income for necessities, such as housing, gas, insurance, and food. You designate 30% of your after-tax income for wants. These include your child’s activities, family days out, and subscriptions. The last 20% of your income goes toward savings and debt repayment.

    You can make adjustments to the percentages based on your specific situation. For example, you might decide to designate 30% of your income toward saving, especially if you have multiple children you want to send to college one day.

    2. Choose a Tuition-Free School

    Where you send your child to school matters for their education and future. If the average price of private schools is giving you sticker shock, and the local public schools don’t have a great reputation, you still have options. CCA is an online tuition-free charter school for students across Pennsylvania. It’s an excellent option if you want your child to get an exceptional education without paying a hefty tuition bill.

    When you enroll your children in CCA, we provide them with all of the materials they need to learn. We also offer socialization activities, so your children can meet and make friends with their classmates. With the money you save by sending your child to a tuition-free school, you’ll be able to invest in their future.

    3. Start a College Fund

    College might seem like it’s in the distant future, but it’ll be here before you know it. Once you have children, it’s never too early to start saving for their post-secondary education, whether they go to an Ivy League university, a state college, or a trade school. Having some money set aside will help make the cost much more manageable.

    You have several options if you want to save money for your child’s future. Some savings accounts, such as a 529 tax-advantaged savings plan or Coverdell Education Savings Account (ESA), are designed specifically for education. Both have tax advantages but usually must be used to pay for educational costs.

    Another option is to open a regular savings account specifically for your child’s college education. It won’t have the same tax benefits as a 529 or Coverdell ESA, but your child will be able to access the money more easily if they decide not to go to college or end up not needing all of the money in the account for school.

    4. Save for Health Care Costs

    Save for Health Care Costs

    One way to prepare yourself for whatever life throws your family’s way is by saving money to pay for medical expenses. Many preventative care treatments, such as annual check-ups and immunizations for kids, are covered at no extra cost under insurance plans. If your child needs treatment for a broken bone or medication for an illness, you may have to pay out-of-pocket.

    Fortunately, you have a few options to make health care more affordable. The option available to you depends on your insurance coverage. Understanding your health care plan can help your family be better prepared for potential health issues and accidents.

    If you have coverage through a job, you might have a flexible spending account (FSA). An FSA lets you set aside money, up to $2,850 (plus another $2,850 if you’re married), tax-free, for health care costs. The money in an FSA is “use it or lose it,” meaning it’ll expire at the end of the plan year. To avoid losing money, it’s important only to put in as much as you think you’ll use within the year.

    A health savings account (HSA) is similar to an FSA but is available on health insurance plans with a high deductible. An HSA lets you contribute up to $7,300 annually if you have a family plan. You don’t pay income tax on your money in an HSA. Unlike an FSA, you can keep your HSA from year to year, meaning you don’t have to spend it down by the end of the term.

    5. Account for Allowances and Activities

    You want your kids to grow up to be friendly, social people. You also want them to explore their interests and discover themselves. Extracurricular activities help your kids make friends and figure out what they enjoy most in life. However, many activities cost money, so it’s a good idea to plan and save for them as much as possible.

    Involve your children in the process by asking them what activities they want to participate in this school year. Then, ask them to add up the cost of each one. There might be a registration fee and a uniform fee, materials fee, or food costs. It’s a good idea to ask your children to pick one or two activities they want to do the most, both from a budgetary and time standpoint. If they’ve got too much on their plates, they might quickly lose interest.

    Also, remember to account for the cost of allowances for your children, and think of what you might have the kids do in exchange for an allowance. You can have them do basic chores around the house, such as making their beds, putting away their laundry, or setting and clearing the dinner table. You can also set rates for specific chores. For example, give them $5 for washing the family car or $5 for vacuuming each room in the house.

    6. Prioritize Your Retirement

    Between saving for health care and your children’s future college education, it can be easy to put off setting aside money for retirement. Still, it’s best to save for retirement along with your other goals.

    There are many reasons why you don’t want to delay retirement savings. A big one is the value of compound interest. When you invest in a retirement account, the money you save earns interest and dividends, which get added to the initial contribution. The earnings then begin to earn interest and dividends, too. Over time, those earnings can make a substantial difference in the value of your account.

    If you put off saving for retirement for 10 years, you’ll need to save up three times as much to make up the difference. For example, at age 25, you put $1,000 in your retirement account. It earns an average 6% annual return. By the time you’re 55, you’ll have $5,743 in the account. If you wait until you’re 45 to put that $1,000 in your retirement account, you’ll have $1,791 at age 55, according to the average annual return of 6%.

    Another reason to save early for retirement is that doing so gives you peace of mind. You know that you have a nest egg and will be able to support yourself in your golden years.

    7. Set Aside a Rainy Day Fund

    An emergency fund is another financial must-have once you have a family. An emergency or rainy day fund gives you the cash you need to cover unexpected expenses, such as a car repair, broken window repair, or vet bill. It can also supplement your FSA or HSA if needed. If you or your spouse lose a job or source of income, your rainy day fund can keep you afloat.

    You want to have between three to six months of expenses saved in your emergency fund as a general rule of thumb. You can start small and work your way up. For example, set a goal of saving $1,000 for an emergency, then increase your goal once you reach it. If you have one income-earner in the family, try to save more in the fund, at least six or nine months of expenses. The bigger your financial cushion, the more comfortable your family will be if something comes up.

    How to Teach Your Kids About Money

    Along with making a plan for your family’s finances, it’s also essential that you help your children learn to make financial plans and teach them about money.

    Teaching kids about money starts from a young age. When they’re in preschool or kindergarten, you can give them a piggy bank or jar to save their allowance. Using a clear container lets them see their money grow. At this age, you can explain that they can use money to buy things they want, such as a new toy. Consider working with them to set a goal, such as saving up to buy something.

    As they get older, you can focus on teaching them about budgeting. For example, a teenager who’s recently gotten their driver’s license and a job can learn how to divvy up their income based on their expenses and start saving for bigger goals. You might encourage your teen to invest in the future by saving for life after high school. You can also encourage them to save for big-ticket, fun things like a trip with their friends or a car.

    Also, open a bank account for your kids from a young age. Explain to them how saving money at a bank works and the value of interest. While the youngest kids will learn about money best if they can touch and handle cash, giving your teenager access to a checking account with a debit card lets them learn how to balance an account and make sure they don’t overdraw.

    One of the best ways to teach your kids about money is to be a good role model. Be open with your kids about the family’s finances and explain what you’re saving for and why. While you might not want to give your children a credit card until they’re much older, you can explain how debt and credit work and the benefits and risks of credit to them.

    Discover How CCA Prepares Financially Savvy Students

    Discover How CCA Prepares Financially Savvy Students

    Financially savvy kids grow up to be financially savvy adults. Managing money is a life skill that everyone should have. CCA recognizes this, so we make passing a financial literacy course a requirement for graduation. If you want your child to enjoy a quality, online, and free education that prepares them for life, learn more about CCA and enroll your child today.


    Commonwealth Charter Academy


    October 4th, 2023


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