Saving for Life's Main Events
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Planned or unplanned, major life events like buying a house or throwing a wedding can be stressful. Having a savings plan that helps you cover both the expected and unexpected will lessen your stress during these times and help make these occasions as they should be—memorable and joyful.
Here, not necessarily in order, are five events that touch many people's lives and tips on how to be financially ready for them:
Buying a house
A home is typically the biggest single purchase many people make in a lifetime. While many believe 20 percent is standard for a down payment, being able to comfortably afford the monthly payments can be more important than how much you put down. Mortgage market expert Dan Green writes, "If you've depleted your life savings to make the purchase, perhaps the big down payment was poor planning. Financial experts call this being 'house-poor'… you have little money left to handle the everyday emergencies of life. Making a down payment of less than 20 percent can be financially conservative, in this way." First-time homebuyers often apply for mortgages backed by the Federal Housing Administration (FHA). Flagstar Bank, a top 5 National FHA Lender, explains that FHA mortgages offer low down payments, expanded qualifying criteria and options for those with less-than-perfect credit.
Having a baby
They may be sugar, spice and everything nice, but babies can cost a bundle. The average cost of raising a child born in 2013 until age 18 for a middle-income family in the U.S. is approximately $245,340 (or $304,480, adjusted for projected inflation), according to a report from the U.S. Department of Agriculture. Also consider that one or both parents will likely be taking an extended period off work when a baby is born, so you can see why it's good to have a nest egg. It's never too early – or too late – to begin saving for a future family.
Going to college
Whether you'll be sending a young adult off to school or you are one of the many adults who further their education, college tuition can be a major expense. In addition to tuition, there's housing, transportation, books and other costs to consider. The average amount of student loan debt for the class of 2013 was close to $30,000, according to the Institute for College Access and Success. Making a plan to save for your or your child's college costs will not only lessen the amount you have to borrow, it will help you avoid loan payments (often with growing interest rates) that can continue long after graduation.
Planning a wedding
A wedding can be one of the most important – and expensive – days in our lives. The average cost in the United States is $25,200, according to the website costofwedding.com. Sure, there are the expenses everyone thinks of: the ring, dress and venue costs. However, there are also many other expenses that need to be considered such as invitations, photography, cake, rehearsal dinners, and a band or DJ. If you have children, it's never too early to think about what kind of wedding you'd like them to have, research the costs and begin to save accordingly.
Taking a dream vacation
We all have that one big trip (or maybe two or three) on our bucket lists. Whether it's taking the kids to Disney World or taking yourself on a post-retirement African safari, financial experts agree the best way to ensure you go on your dream vacation is by saving for it in advance. One guideline is to determine the cost of the trip you want to take, and then save a certain percentage of your income every month toward that goal. It's a pretty solid strategy: a recent poll conducted by the Financial Planning Standards Council found that 74 percent of those with comprehensive financial plans are able to take an annual vacation versus 44 percent of those who had no plans.
Remember, no matter how many of these life events you cross off your list or how many you still have to look forward to, meeting with a financial representative will help you find a savings plan that works best for you and your individual situation.
Just as each of our major life events is unique, so are the best ways to save for them. Sit down with a banker at Flagstar to discuss your situation and goals, and make sure you're prepared for what the future has in store. Find a branch near you.
Flagstar Bank has been in business since 1987 and is the largest bank headquartered in Michigan. It is a full-service bank and a top 10 national mortgage originator. Member FDIC. Equal housing lender.
This story is provided and presented by our sponsor Flagstar Bank.