3 Financial Mistakes That All New Parents Make
One of the hardest things about raising a family is trying to juggle your finances. With every new arrival, your outgoings increase while your income stays the same. If you don’t manage your money properly, you’ll end up with a huge monthly shortfall. That’s why a lot of young families end up getting themselves into a lot of debt which they’ll then spend most of their lives paying off. If you’re clever you can stop this from happening to you, you just need to avoid these mistakes.
Relying On Credit Cards
When you look at your expenses and your income and realize that you’ve got a lot more going out than you have coming in, it’s tempting to get credit cards to help plug that gap. Credit cards can be good for emergencies but it’s a mistake to rely on them too heavily. Maxing out credit cards on your general living costs isn’t sustainable and there will come a point where you can’t borrow any money and you’ll have an even bigger shortfall because repayments will be added to your monthly outgoings. Before you start a family, use a credit card debt relief company to clear any outstanding debts that you’ve already got. Once you’ve done that, you need to view credit cards as a last resort and try to balance your finances by cutting costs or increasing your income rather than excessive borrowing.
Opening A Savings Account In Their Name
When your new baby arrives, you’ll probably get money from family members to put toward their future education and you’ll want to make contributions yourself. This is absolutely the right thing to do, but don’t open the account in their name. If you fall on hard times and you’re in desperate need of cash, you can dip into those savings and then replace them later on when you’re in a more stable position. However, if you put the account in their name, you won’t be able to get hold of it. It’s best to put it in your own savings account so you can use it, but only if you absolutely have to.
Most new parents aren’t even thinking about their own retirement fund when they’re trying to pay for a new child but that’s not smart. If you neglect your own retirement savings, you’ll find yourself struggling later in life. Even though it seems like it’s a long way off right now, you need to be making contributions. Even if you’re only putting a tiny amount in each month that money is still gaining interest. The key to having a healthy retirement fund isn’t putting huge sums of money away at a time, it’s starting early on and making small contributions. Then the compound interest will do all the work for you. If you’ve paid off debts that you had before, you can see this as surplus money and some of it can go into your retirement pot while the rest goes towards the cost of raising a child.
These are the three most common financial mistakes that young parents make and you should avoid them at all costs.