When discussing the millennial generation, it’s very rare to find someone connecting the generational term with either “parents” or “marriage.” Since millennials are deeply in debt, out of work and still living at home, getting hitched and having children aren’t at the top of their short-term agendas.
It was reported last year that there were more than 10 million new millennial parents, and millennials are accounting for 80 percent of four million new births each year. This number is only expected to grow exponentially in the coming years. Although millennials have been dealt a bad hand since the Great Recession, this hasn’t prevented them from continuing on the tradition of finding the right partner and having children.
The one behavior that dominates the perception of millennials is that they are terrible with money. For years, we have been inundated with notions that millennials live paycheck to paycheck, spend all of their money on the latest iPhone or ripped jeans and refrain from setting money aside for a rainy day.
Whether or not this is true remains immaterial because of the fact that we all go through money troubles. It’s important that we understand the monetary errors of our ways and learn from them.
For millennial parents, a lot of financial mistakes transpire, and it can really erode your financial security, long-term savings strategy and rainy day fund. From buying the latest baby gadgets to not investing in life insurance, millennial mothers and fathers make a vast sum of errors, particularly from the idea that a baby has to have this because the neighbor has the same thing.
Here are four common financial mistakes millennial parents make and how to solve them:
Overspending & Buying Everything
If your main prerogative your entire pre-parenthood life was to keep up with the Joneses – the latest big-screen television, expensive car, new clothes and smartphones – then that behavior will be translated into parenthood. This mean that you’re going to buy the latest baby gadgets, an abundance of clothing that the baby will either outgrow or only wear once and lots and lots of toys. Let’s face it: babies don’t need a lot except plenty of love, food, clothing and so on.
Solution: the next time you head to a baby store and you’re about to purchase something, ask yourself: will this contribute positively to my baby’s health and life?
Not Making a Baby Budget
Prior to becoming a parent, each millennial should have some money set aside strictly for the child. Instead of just waiting to save money when the baby is born, a special account should be established before the planning stages and it should be contributed to regularly. This will only be used for things like diapers, carriage, bed, etc.
Furthermore, a budget should be created, too, that is meant to accommodate the needs of a child. A baby budget should be comprised of diapers, food, clothing, healthcare and other essentials.
Solution: if you plan to have a baby next year, start a high-interest savings account and put down $1,000 immediately and then contribute on a monthly basis.
A Lack of Preparation for Lost Income
When millennials become parents, there will be some lost time from work, whether a few days or an entire year as part of maternity/paternity leave. For whatever reason, millennials will not prepare for this lost income and adapt to this paucity of money. It’s important to produce a plan on how to do without the extra $20,000 a year because then you could be in financial straits when the baby is just three months old.
Solution: in addition to having a special account and a baby budget, it’s imperative to have a laid out financial plan. Will you seek out a part-time job? Will your family cut back on household expenses? Are there any workplace benefits for new parents?
Refraining from Acquiring Life Insurance
Indeed, with an immense amount of households living paycheck to paycheck, it can be understood as to why some millennials will neglect buying life insurance. However, accidents do happen and if something should happen then you wouldn’t want your significant other to be stuck looking after a three-year-old child all by themselves.
Solution: as soon as the baby is born browse the marketplace for the best life insurance products available.
Final Thoughts
Having a baby is one of the greatest experiences for any person. However, the entire ordeal may be substituted with worries about money and career. This can be avoided with career, financial and household planning with your spouse and a logical path agreed upon. A millennial’s lifestyle will probably be transformed when the baby comes, and hopefully their poor financial habits will too.
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