No one can argue that having kids isn't expensive, but there are ways to stretch your dollars. Be a better parent—and financial manager—by steering clear of these money miscues.
Mistake #1: Putting the Kids First
The only way to ensure financial freedom when you eventually retire is to start stashing away money now. Saving for retirement should be a priority—even over funding a college savings account, says Stuart Ritter, a financial planner with T. Rowe Price. Your children can take out loans for school, but that won't be an option for you later on. Aim to contribute at least 15 percent of your annual income to a tax-advantaged retirement account. If you don't have access to a 401(k) through your employer, consider setting up a Roth IRA.
Mistake #2: Not Treating College Like a Financial Decision
Only around 40 percent of families have an actual plan for paying for a degree, according to student loan provider Sallie Mae. Also worrisome is that few mothers and fathers tell their kids how much they'll need to borrow to fund their education and how that burden will later weigh on them, says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. Help your kids do the math with Sallie Mae's student loan repayment calculator (https://www.collegeanswer.com/tools/loan-repayment-calculator/default.a…) to estimate what their loans will cost them in monthly payments versus their potential future paychecks.
Mistake #3: Parenting Without a Safety Net
Planning for every possible situation—even early death—is crucial. Yet only about half of parents with kids 8 to 14 years old have life insurance, says Ritter. If your family couldn't survive without your or your partner's income, consider buying term life insurance, which is usually the least expensive type because it pays out money only upon a death. (But keep in mind that it expires based on the number of years you purchase.) You'll want a policy large enough to cover your survivors' future living expenses and college costs. For most families, that comes to between 10 and 20 times the main provider's annual income. Go to Bankrate.com's life insurance calculator (http://www.bankrate.com/calculators/insurance/life-insurance-calculator…) to estimate how much coverage you need. And draft a will—without one, state law decides how to split your assets among your loved ones.
Mistake #4: Telling Your Kids How to Spend Their Money
Many parents make all the financial decisions for their children. Even if our choices are smart, we aren't teaching kids how to manage money, says Joe Duran, CEO of United Capital. Get your kids involved by asking for their input, including what they'd cut from the family budget if they want to go on vacation.
Give teens a clothing and entertainment allowance so they can decide how best to spend it. If they blow all their cash early in the month, let them—that will be a lifelong lesson. It's better they learn from small mistakes now instead of costly ones later that could lead them into credit card debt.
New Jersey-based financial expert Stacey L. Bradford is an award-winning journalist and author. When she isn't writing, she's busy teaching her kids the value of a dollar.
Actions speak louder than words, so be mindful of how you spend money in front of your kids. Chris McLean, a financial advisor with wealth management firm Signature, explains how to set a good example.
Avoid credit card debt: Instead, show your children how to live within their means.
Don't buy their love: This is an easy trap to fall into, especially if you're divorced. Remember, kids want your time—not your money.
It's not a contest: Stick to your personal values and budget to teach your children they don't need to have everything their friends own.
Originally published in the February 2014 issue of Family Circle magazine.