Just like you might have had from everyone, parenting doesn't come with a manual you can follow. But being aware of the pitfalls in advance prepares you on how to avoid them. The biggest mistake parents often make, and one that's rarely highlighted is money wastage. Many parents often spend more than they should in a quest to give their children the best.
Most of the time, the mistakes that can keep you from being in charge of your finances as a new parent are unintentional. They may occur because you fail to notice them, and by the time you do, it is always too late.
This article will explore six such blunders that can cause young parents to waste money, spend over their means, and leave their financial future in limbo, as well as what you can do to avoid them. Read on.
Having a baby introduces new financial responsibilities that are bound to change how you spend your income altogether. With so much excitement at the time of your baby's birth, you will likely be overwhelmed and busy to the point that you may forget to adjust your budget. Without changing and tracking how you spend money, you will find yourself spending a lot more than you wished to spend.
Without having a budget and sticking to it, you risk wasting money. This can come to haunt you later when you have to start paying expensive baby bills like school fees. Additionally, you will also run the risk of derailing personal financial goals like retirement. A budget will help you prevent financial disasters by curbing expenditures and instilling healthy money habits in you.
Before your baby is born, ensure you have a tested budget that you can switch to immediately when they arrive. Having a budget ready guarantees that you don't spend money without a strategy and puts you in a better position to regulate your spending during such an emotional period.
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As a new parent, you will want to give your child the lifestyle you never had, especially during the first few years. You'll want to buy them the nicest clothes and toys, send them to the best daycares, and transport them in cutting-edge strollers. While this is admirable, it leads to overspending and money waste.
Before spending thousands of Shillings on your baby, take a step back and question whether the purchase is worth the money or if it is something your baby needs.
The daily expenses might seem harmless at the start, but they'll add up. And before you know it, they're negatively impacting your finances. You'll find yourself spending more on things that add no value to you and wasting money you could've put on essential projects.
This doesn't mean you shouldn't spend on your child. Rather, consider doing it in moderation and within a strict budget. Allocate a small amount on your budget as "baby discrepancy" and spend that amount on buying your child all the extra things that are nonessential. By setting a specific budget, you can spend on your child without going overboard or trying to overcompensate for the little things you didn't have growing up.
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When you are new at something as important as parenting, it is easy to fall for peer pressure or copy what other parents around you might be doing. You might find yourself wanting to replicate everything they did or are doing to show you have the capacity to give your child the best. For delivery, you'll use the same high-end hospital they used and enroll your child in the most expensive daycare you can find. But is it the right thing?
Keeping up with the Joneses will allow you to maintain your social status, but you will be living far beyond your means in the end. Looking up to others to boost your status will simply waste your money and, if you are not careful, might bring you major issues in the long run.
Give your child the best life you can afford, and use the extra money to help you achieve your long-term financial goals. Instead of being motivated by what everyone around you is up to, be driven by pursuing your goals.
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College may seem far away; your child, after all, isn't even old enough to start kindergarten, so what's the pressure for? Given how expensive education has gotten over the last few years, you should prioritise saving and investing for it from an early stage.
With so much to save for and many bills to pay, most parents will often delay education savings until their child is almost going to high school. Then they start playing catch up and spending much of their income on education planning.
Good education remains the best way to ensure your child's bright future. But without planning for it early, you might not give them the quality of education they deserve. Worse, you could push them into debt when they need to fund their college education which could slow their financial growth as young adults.
Starting to save early has benefits for you as a parent:
Raising children is an exciting journey, but it is also financially draining. Once you assume the responsibilities of providing for your little one, it is easy to get carried away and make them the center of your finances.
Before you know it, 100% of your income is going towards giving them the best life possible, and you have forgotten your financial goals. This can seem manageable initially, but as time passes, you could find yourself behind your targets and your plans unsalvageable.
While it's vital that you provide for your child, support them financially, and set them up with a perfect future, don't forget your future or shelve your goals, especially retirement.
Saving for retirement isn't just good for you but for your children; you won't have to rely on their support in your golden years. This will give them a good financial head start as they won't need to pay black tax to support you, and they can use the money to invest for their own future.
Read Also: How to Plan for Retirement While in Your 30s
Ensure you don't forget about your personal goals by having investment plans and tracking them individually. Separate your retirement nest egg from your children's education funds, and don't over-prioritise one over the other. Also, look into ways that can help you build equity that can help you generate income in retirement.
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It's pretty natural for a parent to want to raise their child on their own, protect them and be there for them at all times. But given the rising cost of living and increase in two-income families, modern families have to look for a different way, like enrolling their child in daycare so they can work during the day. However, for some parents, this is not a path they want to follow. So one parent ends up quitting their job to stay home and look after the baby. This can be a financially devastating move, especially if done from an emotional point of view.
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Quitting your job will have two massive effects on your finances. One, with one income off the table, your lifestyle will likely change. You'll have to make drastic changes to your budget and how much you save. Your financial goals will also be impacted, and you might have to postpone some. Second, your career will take a hit, and you might have difficulty getting back into the workforce later.
Here are some things you should look into instead of outright quitting:
Mistakes are unavoidable, especially as a parent with your hands full and juggling too much. However, taking charge of your finances and making calculated actions during the first year of parenthood can help you overcome financial difficulties and avoid costly pitfalls in the future.