Navigating Divorce when Children are Involved
Divorce brings complex financial decisions that have to be made, especially when children are involved. While disagreements may arise, co-parenting for your child’s well-being is PARAMOUNT. Emotions run high, but with thoughtful planning, you can pave a stable path forward. But, don’t forget the financial “peace” to this puzzle! Here are a few significant things to consider when divorcing with children.
ONE, children of all ages can experience much emotional trauma when their parents decide to get divorced. Extracurricular activities are a great way to help them express themselves and positively enrich their minds. The downside of these activities is the $$price$$. For example, dance classes can easily cost over $200 a month, plus shoes, costumes, etc. This is why it is important to calculate these expenses into your POST divorce financial plan.
TWO, for parents with younger children, devising a strategic childcare plan is CRITICAL. This can especially impact couples with a stay at home spouse. More than likely, that spouse will need to begin working again after the divorce, which means a new childcare plan must be developed. While some are lucky enough to have parents or other family members that can watch their children, most couples are not as fortunate. Childcare can be very costly and must be considered in a couple’s new financial situation.
THREE, as children get older, they will need “bigger,” more costly items, such as computers, cell phones and trendy name-brand clothes. How will you as a couple handle these big ticket items? Make decisions on if and when you will allow your children to have these items and how they will be paid for. Having a united front is key!
EXAMPLE, in high school, kids want a new car (and the gas and insurance to go with it), class trips, and spending money for dates and their friends. Will you pay for these items or will you require your child to earn some or all of it? Will they be paid for chores and/or given an allowance, or can they get an outside job? This is also a great time to teach your children about financial responsibility, but as co-parents, a consistent plan of action is key!
It is important to also plan for your child’s future after they graduate high school. How will you and your ex-spouse help your child go to college? It is never too early to start saving for their future! If you have a college savings plan for your children, make decisions during your divorce settlement about who will own these policies and how the money will be utilized if your child does not go to college. Will you continue to contribute to these plans after your divorce and how much? There are also thousands of scholarships available, so it is important to take the time to help your child look into these resources. The earlier you start planning, the easier it will be when your child is ready to apply for college.
Consider that traditional divorce will typically NOT encourage clients to discuss these matters as most attorneys feel by having it in the marital settlement agreement they are obligating their clients to future financial promises that are over & above the law. If they are not in your agreement with your spouse, be prepared for it to be an area of tension later! Find a process that is family friendly early. You have options!
Divorce is especially difficult for children. Keeping their well-being at the forefront of your negotiations will not only lead to a more peaceful divorce, but will also help prevent future surprises. At The Financial Knot®, we can assist parents in planning for their own, and their children’s, financial future.
The Financial Knot® is another business name for Independent Advisor Alliance, LLC. All financial planning advice is offered through Independent Advisor Alliance, LLC, a registered investment advisor.
