Disclaimer: I am not a financial professional. This post is meant to be informational only and is solely my perspective. Please speak to a trusted financial advisor regarding your situation.
As a busy mom, paying the bills, remembering to give your kids lunch money, and paying for all of the extracurricular activities probably push financial planning to the bottom of your to-do list. However, being married to a financial advisor has opened my eyes to situations that all moms (and dads!) should be aware of. Below are four tips to help you on the path to becoming a more financially aware mom!
1. Make A Will
One of the first questions my husband asks new clients is, “Do you have a will?” It is surprising how many parents do not have one. This is a scenario that no one wants to think about. However, if something tragic happens to you and your spouse, it is important to have a plan. Without a will, the state will decide what happens to your house, possessions, and even your children! Creating a will requires a little bit of time and a lawyer but ensures you have peace of mind.
2. Get Life Insurance
When you buy a house, you need homeowners insurance. When you own and operate a car, it is a legal requirement to have auto insurance. But surprisingly, it is not considered mandatory to have life insurance. Death is not a topic that we like to think about. However, accidents happen. If something happened to your spouse, would you be able to pay your mortgage or continue the lifestyle that you have?
My husband specializes in life insurance and has made sure that we both have life insurance policies. As a stay-at-home mom, I thought, why do I need life insurance? As my husband pointed out, he needs to work and bring home a paycheck. I take care of the kids, make sure they get to all their activities, do all the shopping, cleaning, and most of the cooking. We hate to think of something happening to me, but if I were gone, he would have to pay for childcare, a cleaning service, etc.
My daily jobs are costly to hire out. As the sole breadwinner, my husband’s life insurance policy is a lot larger than mine to ensure that I could pay the mortgage and take care of the kids. If you and your husband work, your employers may offer a group life insurance plan. This is a great start, but it may not be adequate to cover your needs. A general rule of thumb is that life insurance should be seven to ten times the insured’s annual salary.
3. Create A Retirement Plan
Whether you are a working mom or a stay-at-home mom, it is important to think about your future. Any good financial planner will tell you that it is more important to ensure that you have money for your retirement before you start paying for your child’s college education. Your children can take out student loans to pay for higher education, if necessary.
You could be living in poverty in your later years if you don’t plan well for your future. If you are working, take advantage of your employer’s retirement program, probably a 401k. When I was teaching, I had a 403b, which I contributed to. Despite all the work I do as a stay-at-home mom, I don’t benefit from an employer-sponsored retirement plan. However, even stay-at-home moms can save for retirement despite lacking personal income. You can open a spousal IRA, where the working spouse contributes to the account.
4. Start a 529/College Funds for the Kids
Once you have a financial plan in place for your future, it is time to plan your child’s higher education. If you know that your child will be attending college, a 529 Plan is a popular route. A 529 Plan is an educational savings plan with many benefits, with the prime one being that the earnings on the account are not subject to federal or, in most cases, state taxes.
