The Top 5 Financial Mistakes that Parent's Make

1. Buying the wrong life insurance or none at all.
Contrary to popular belief it is not unaffordable to purchase life insurance in your younger years. It is imperative to have a life insurance policy for children gods forbid something happen and they are left on their own. The question is how much is enough? There are different ways to calculate this number. The easiest way is to multiply your income by eight. In other words if you make $50,000 annually then you should carry a $400,000 plan. You want to take into consideration other assets or debts such as a mortgage or college. Everyone's situation is different and you should contact a professional to be sure just how much insurance would be recommended. Now you must give special consideration to a stay at home parent. It is often believed since this person does not contribute financially that life insurance is not needed. However, if the caregiver of the children passed away the children would need to be placed with someone else or in a day care which can get quite costly. Life insurance for this person should be able to cover all and any expenses associated with providing care for the children.

2. Not obtaining disability insurance.
Many of us do not even know what disability insurance is or how to obtain it. This type of insurance can actually be a lot more useful than life insurance. Say you get into a terrible accident and are injured severely how will you support yourself? Life insurance is not going to help you out. Reality is younger people all have a better chance of being disabled than actually dying. This insurance should be able to replace at least 60% of your income. It is usually paid on a monthly basis. Amazingly enough it is very affordable to obtain.

3. Waiting to put together a will.
Parents who are young often feel healthy and at times invincible. Younger people don't really have death on their minds therefore postpone doing a will. This is a task that should be taken care of immediately. It will protect your assets and your children in the future. A will should not only include your assets, but most importantly who cares for your children should anything happen to you. Without a will in place the state decides who manages the finances and who will raise the children. Wills can be costly if you go through an attorney so if money is the issue buy a premade will and fill it out and get it notarized.

4. Do not forget to save for retirement!
I know the mindset of young parents. Young parents tend to think we are young; raising a family, trying to get daily expenses covered who can think of retirement? Well please be advised before you know it the children will be grown and retirement will be around the corner. Nowadays, major companies offer different retirement plans such as 401(k). Take advantage of any retirement savings plans offered to you through your company. Putting retirement on the back burner in essence will affect your children who will be faced with the burden of financing their parents late in life.

5. Don't wait to save for college.
Put money away while the children are young for college. A false assumption that is made is that financial aid is "free money". This is not true at all 56% of financial aid is in the form of loans, which means it must be paid back. Everyone should put some money away for college for their children. Some states offer prepays programs. For instance, Florida has a payment plan for college called Florida Prepaid. Basically the way it works is you make monthly payments from the time the children are young for a certain amount of time and when the child is ready to go to school a majority of it is paid for. The drawback to these programs is not all schools honor it. Look around your area and see what is offered and take full advantage of it.