6 financial mistakes every parent must avoid
The sky is the limit when it comes to your children and their comfort. Parents don’t mind going the extra mile to accommodate their children’s needs.
One of the key duties as a parent is to take care of your long-term finances – a crucial step that many overlook. And while you might save up for your child, young families often forget to secure their own financial future. And with the arrival of a new baby comes a whole new set of responsibilities that many young parents aren’t prepared for.
Not building a safety net
An important financial goal for young couples must be setting up an emergency fund. You need to make provisions to build a monetary cushion in case of job loss, medical emergency, home repair or family crisis.
Stack up enough cash to cover your expenses for three to six months, depending on the number of income earners. A good way to secure your family would be investing in HDFC Life’s Savings and Investments Plan that offers multiple avenues to grow your money.
Not having a retirement plan
At least 5 per cent of your monthly salary should be saved towards your retirement fund. While you may feel that you can’t afford to save so much, the fact is that in the long run you cannot afford not to.
You might have to work for extra years if you don’t save up enough for your golden years. Only those who invest wisely have the luxury of hanging their boots when they desire. Head to our Retirement Planner Calculator to know your saving target.
Binge buying for your children
Walk into any baby store and you will be spoilt for choice by the endless options of strollers, baby carriers, gadgets and gizmos for your child. And mind, none of these come cheap. You might be surprised at how expensive some of the essentials are.
If you thought the expenses would lessen after the initial years, you are absolutely wrong. As the child grows, so do the expenses. Falling into the trap of buying the latest branded clothes, games, gadgets on demand is easy. What isn’t, is practicing restraint. Remember that fulfilling all their demands could set them up for a lifetime of expectations and disappointments.
Not prioritising education
The biggest failure as a parent would be not being able to afford your child’s choice of career. Years will go by as you are busy with the daily grind and it will soon be time to fund for their college. Let us also factor in the rising college costs and if you don’t save early, the cost of education could be a huge burden.
Not tracking finances
The rising expenses make it difficult to set aside money at the end of every month. But living from paycheck to paycheck is a recipe for disaster and you could end up in debt.
The best way for young families is to draw a budget and track expenses and income at the end of every month. You could use apps to analyse and reorganise your family budget to get rid of unwanted expenses. It is important to educate your children that saving is not what’s left after spending but spending what’s left after saving.
5-point plan for young couples to achieve financial goals
- Whenever possible, opt for pre-loved furniture, gears, baby stuff from websites that offer pre-owned things.
- Don’t always say ‘Yes’ to your kids. Never encourage your child’s unrealistic expectations. Keep them away from instant gratifications, else their expectations could get out of control.
- It is never too late to start planning finances for your entire family. Educate yourself about the saving and investment possibilities on HDFC Life’s portal and opt for a perfect plan.
- Teach your children the value of money early on. While they might love the idea of owning a Mercedes, do they know how much the big car costs? Include them in big financial decisions and set a right example by saving, investing adequately for the future.
- Trim your pre-baby lifestyle. If you and your partner indulged in dining out often, multiple vacations and luxury shopping, you might want to reconsider it. Not factoring in the additional expenses of your increasing family could land you in debt.
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"The thumb rule for retirement planning is - the earlier you start, the more you save. However, with age, your priorities change too. So, you need to factor in the cost of living in the present vis- a -vis future."
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