For many young adults, heavy debt and lower-paying jobs lead to a delay in traditional life goals like buying homes and starting families. However, research suggests that millennials’ financial worries are adding up to more than stress and disappointment, particularly once they become parents.
Two in five young parents rate their financial health as unsatisfactory, and 40 percent said financial stress is putting a strain on their relationship, according to a survey from the National Endowment for Financial Education and Parents Magazine.
“Many young adults start off with significant student loan debt,” says Paul Golden, director of Smart About Money, a nonprofit foundation inspiring educated financial decision-making for individuals and families. When you add housing, groceries, utilities, transportation expenses and health care costs, the strain increases.”
The price tag of raising a child is more than $304,000 based on the projected inflation-adjusted cost of rearing a child until age 18, not counting college. Managing that financial pressure begins with planning for the future and truly understanding the costs associated with adding a baby to the family or buying a new home, Golden added.
Get started with these tips and learn more through self-directed courses at SmartAboutMoney.org.
Debt reduction. Make a plan to pay off excessive debt, particularly credit cards. Tackle your lowest balance first to gain momentum. Additionally, pay attention to higher interest rates that are costing you a lot of money.
Use a budget. Get a budget and spending plan in place to keep track of your expenses. Try an envelope system with monthly allowances for groceries, entertainment, utilities, etc.
Start saving. Build an emergency fund. Aim for a small, achievable goal as low as $500, and then set the bar higher. Participate in your employer-sponsored savings program to boost retirement savings, especially if there is a match. As far as your child’s college savings, save what you can, when you can. Every little bit will help.
Child care. Consider establishing a flexible spending account if one is offered by your employer. Parents can use pretax dollars to pay up to $5,000 in child care expenses in most states.
Review insurance and important paperwork. Create a will to name your child’s guardian and designate at what age any payouts, savings or investments will be distributed. With health insurance, notify your employer within 30 days of the birth to ensure the child is eligible for any dependent benefits. Review your employer’s life insurance plan, and determine if it is adequate for your needs.
Save for the future. Put money for short-term expenses in safe investments, such as savings accounts and certificates of deposit. These low-interest-rate investments will not grow dramatically, but they will not lose money, either. Money you will need beyond five years should have the opportunity to grow at a risk level you are comfortable with. Use a combination of steady-earning savings accounts and more volatile stock and bond mutual funds.