Family finances are essential in every household. When parents have children, family finances are always anchored to the future of the kids. However, some young parents often commit mistakes in their family finances that can also affect their financial future.
It is not a secret that raising a child can be very difficult, and sometimes addressing the family finances is set aside. Finance experts believe that at an early stage, young parents should think about their financial future as soon as possible.
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Here are some ways to avoid mistakes in family finances that young parents should consider:
Create an emergency fund
No matter how much we plan for something, there can always be a sudden event that could cause a financial blow to the family. That is why a family must have their finances ready, even for such events.
According to a financial planner, Jane Nowak, a financial cushion for at least three until six months should be part of a family's goal. She also said that starting with 25 US dollars per paycheck will be a good start.
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Save-up for your retirement
One of the mistakes of young parents is allocating all of their finances to the future of the children. When the time comes that they retire, it already becomes problematic for them, especially when paying for health needs come along the way.
However, this can be avoided by making sure that a retirement plan is in place. Saving up for retirement should be the priority like allotting money for the kids' college tuition.
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Check on some eligible tax savings.
There is an existing child tax exemption that some young parents might have missed. Some of these are child tax credit, child-and-dependent-care credit, adoption tax credit, and tuition for special needs.
There is information that may be found on the IRS website for every family's eligibility for these tax credits.
Teach your kids financial literacy
Another mistake of young parents when raising their children is shielding their kids from the family finances, especially when things get tough. At a certain age, kids should learn about finances so that simple things like budgeting can be known and understood by children.
According to financial planning experts, the influencing parents bring to the way children manage their finances is enormous; that is why starting at an early age is essential.
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Set a realistic expectation
Part of managing family finances is making sure that the kids are involved in a way that they understand what their parents can afford and cannot afford at the same time.
According to The Simple Dollar, parents should first learn that instant gratification can cause disappointment on kids in the future.
