Young families looking to achieve financial stability should consider several foundational steps early on. These steps include making a plan to repay personal debts, saving up for a down payment on a house, and planning for the unexpected. To learn more about the steps young parents can take to build a financially secure future for their families, read on!
1. Pay Off Personal Debts
According to CNBC, the average personal debt amount hit $38,000 in 2018—accounting for things like credit cards, personal loans, and student loans. Moreover, about 40% of Americans devote half of their monthly income to repaying these debts—which prevents them from saving money for the future and achieving other financial goals like buying a home, taking a family vacation, and putting money away for the future. Unpaid debt may also lead to strain in a marriage, health complications, behavioral issues among children, and financial stress.
To build a financially secure future for your family, it’s important to start by paying off your personal debts. By making a plan to repay your debts, you’ll be on your way to saving more money for the future and conquering other financial goals such as buying a house, building an emergency fund, and saving for retirement.
2. Save for a Down Payment on a House
If you plan on buying a home in the future, it’s important to start saving for a down payment on a house as soon as you’re able. While the length of time it’ll take to save for a down payment will depend on your household income, how much you’re setting aside each month, and whether you’ll be putting 3.5%, 10%, or 20% down, it could easily take several years to save enough money to buy a home.
As you start building a down payment fund, it’s important to learn about the different requirements you’ll need to meet when you’re ready to purchase a home. To finance a home purchase, for instance, most lenders will require a down payment of at least five%—but specific down payment requirements vary depending on your credit score and the type of loan you wish to obtain. You can finance a home purchase without a down payment in some situations, but your interest rate and monthly mortgage payment would be higher.
3. Think About the Future and Plan for the Unexpected
One could argue that just about any type of financial planning means thinking about the future, but here we’re referring to things like estate planning and purchasing life insurance. Even though you’re young and plan to be around for many years, one of your goals as a spouse and parent is probably to provide for your loved ones now and in the future—even in the event of your incapacitation or early death. As such, it’s important to create an estate plan and purchase a life insurance policy that will protect your loved ones if you can’t be around to provide for them.
Typically, you’ll want your estate plan to cover the following:
- The name of an appointed guardian for your children
- The recipients of your money and belongings
- The names of those responsible for making financial and medical decisions on your behalf
Estate planning can be an unpleasant task at any age, but a good estate planner can take some of the agony out of this process. To find a good estate planner to assist you, be sure to obtain recommendations from trusted friends and family members, and look for attorneys that specialize in estate planning.
Your Financial Future Depends on the Steps You Take Today
By taking these three steps while your family is still young, you’ll be one step closer to conquering long-term goals like paying off personal debt, saving for a down payment on a home, and making sure that your family will be well cared for in the event of your incapacitation or early death. Any long-term financial goal takes time, planning, and dedication, but these tips will help you to get the ball rolling.