All parents want to make solid decisions with their finances. Unfortunately, it can be easy to make money mistakes that have serious impacts on your family. Understanding these mistakes can help you avoid them or fix them if they’ve already occurred.
Check out these common money mistakes parents make to find out how you can get your finances back in order:
Going All Out with Baby Purchases
New parents often don’t know how much to spend to get ready for their first child. You’ll likely need:
- Car Seats
- Baby Clothes
- Baby Monitors
While you’re stocking up on the essentials, it can be tempting to buy all the newest gadgets. In truth, new parents can get by without a lot of the baby gear they see. You might not need to purchase:
- Diaper Wipe Warmers
- Multiple Strollers for Different Locations
- Shopping Cart Covers
- Crib Bumper Pads
- And More…
For more detailed information about the important items you need to purchase for your baby, check out our other article here. You can avoid the mistake of paying thousands of dollars too much for baby gear by checking out second-hand stores and sticking to the essentials.
Overspending on Kids
Parents want their children to have the very best. Unfortunately, you can end up falling into a financial trap by trying to satisfy your children’s every want. Spoiling children can have a negative effect on the behavior of children. In fact, experts in child behavior say that spoiling a child is often a precursor to children having issues with peers, teachers, and employers as they get older.
You can also hurt your monthly budget by purchasing the newest and shiniest gadgets for your children. Focus on what children need, with a few extras thrown in throughout the year, to limit the impact of this money mistake.
You could also check out local consignment stores to get kids toys at reasonable prices. There are also online consignment shops, like swap.com, that allow you a wider selection. You can even re-sell your children’s once-loved toys in these stores.
Trying to Live Beyond Their Means
It’s easy for parents to fixate on a certain idea of what their life should look like. Parents can get swept up in wanting to take their children on the nicest vacations. It’s easy to overextend your budget while trying to secure the ‘best’ for your family.
You can resolve this money mistake by sticking to your budget, regardless of what other parents around you are doing. Don’t risk the high-interest rates associated with credit card debt by trying to push past the limits of your financial means.
Not Following a Budget
A budget helps you handle expected bills while also setting money aside to deal with unexpected expenses. Professional financial planners advise parents to work from a written budget, instead of allowing their income to go to waste.
Working from a budget can ensure that your money goes towards:
- Emergency Savings
- Retirement Savings
- College Savings
You can sit down with your partner to hammer out a budget today. There are many free online tools that can help you figure out your budget, including sites like:
If you have a large amount of outstanding debt, you might consider refinancing it with a loan, so you only have to worry about one monthly payment on your budget.
Mismanaging Financial Priorities
Parents can have a difficult time deciding how they should utilize their savings. It can seem logical and straightforward to put your savings into college funds for your children, especially as tuition rates go up around the country.
However, putting all your savings into a college fund often works against you in the long run. You need to focus on saving for your retirement through an IRA plan or a 401k. Remember, your children may be able to allay the costs of college with:
You need to ensure you have money set aside so you can retire and enjoy your golden years. You can speak with your employer about setting up a retirement fund to handle this common money mistake.
You can even set up a retirement fund if you are self-employed, or if you don’t want to set up a retirement fund through your employer for any other reason. You have many options for personal retirement funds, including:
• Traditional IRAs
• Roth IRAs
• Solo 401(k)s
Not Setting Up an Emergency Fund
Many parents fail to prioritize their savings properly. This can lead to a serious money mistake that many people only recognize after an emergency. All parents should focus on setting up an emergency fund to cover:
- Emergency Medical Bills
- Emergency Car Repairs
- Emergency Trips
You can factor an emergency fund into your monthly budget to quickly correct this money mistake. You don’t have to save an incredibly large amount every month. Start small and, before you know it, your emergency fund will be in good condition.
Financial experts even recommend automating the emergency fund saving process. Set up your banking account to automatically put money in your emergency fund to take some of the stress out of this process.
Failing to Carry Enough Life Insurance
No parent wants to imagine being torn away from their family, but accidents and unexpected illnesses can strike without warning. Parents that do not carry enough life insurance can leave their children in dire circumstances.
Generally, your children and family might need 10 times your yearly income to:
- Pay Bills
- Handle Debt
- Cover College
You can go over your insurance policy to make sure it is sufficient to take care of this common money mistake.
Neglecting Your Child’s Financial Education
Your children need to learn about financial literacy, just like they need to learn reading, writing, and arithmetic. Parents who don’t invest time in their children’s financial education can end up causing serious problems down the road. All children should be taught how to:
- Balance a Checkbook
- Write a Check
- Budget Their Monthly Bills
- Save Money
Avoid this financial mistake by talking about money with your children regularly. Before you know it, they’ll be financial experts, ready to handle their own bills and budget. Click here to read more information on ways to get kids excited about responsible money management.
Demonstrating Poor Financial Behavior
Spending time teaching your children about the best ways to handle their financial decisions is important. Your children will also build their financial knowledge by watching how you treat your budget and bills.
Parents who rely on their credit cards, run up their debt, and don’t use a budget are setting an example for their children to follow. Children who grow up without watching their parents carefully plan for purchases and set aside money often mimic these behaviors once they’re living on their own.
You can correct this money mistake by buckling down and focusing on demonstrating sound financial decision making in your day-to-day life. Include your partner in your financial discussions and you can show your children how to master their finances now.
You Can Put Common Money Mistakes Behind You
Many parents fall into common money mistakes because they’re busy trying to provide the best possible life for their children. It’s easy to make these mistakes as you work to pay bills, support your family, and save for the future.
Fortunately, you can square these mistakes away and move forward with your life on financially sound footing. Sit down with your partner and hammer out a monthly budget, making room for:
- Retirement Savings
- An Emergency Fund
- Life Insurance
- College Savings
Demonstrate good financial behavior for your children and soon these money mistakes will just be a distant memory.