Caring for a special needs child is one of the most rewarding things a parent can do. As difficult as it may be at times, the rewards know no bounds. However, you must address the financial realities of special needs children so that you can protect them while they are young, as they age, and so that they are cared for when you are no longer here.
Financial Challenges of Special Needs Children
NYDailyNews.com reports that the average cost of raising a child to the age of 18 is $250,000. If you have a special needs child, those costs can easily exceed ten times that amount. Medical bills alone for a child with severe autism can accumulate a staggering three million dollars in medical bills over the course of a lifetime.
With that in mind, it is even more critical for parents of special needs children to come up with an effective financial plan that will protect their children’s interests now, and in the future. Unfortunately, many parents in such a situation do not know where to begin.
These steps will help you prepare for the financial realities of raising a special needs child without greater financial confidence.
Fine Tune Your Expenses and Spending
The reality of a special needs child is that it often requires one parent to stay home as the primary caregiver or to sacrifice a great deal of career potential due to missed days at work, loss of productivity, and the many distractions from work related to your child. The loss of income is not simply suggestive. Mint reports that women who are raising children with autism earn 35 percent less than those raising children without the condition.
Those changes occur before the additional expenses begin to mount – which means you need to cut your costs and standards of living while making the financial adjustments necessary to lower your monthly expenses. That can include things like evaluating mobile phone plans and comparing costs, identifying services you do not utilize fully and eliminate them, kicking cable to the curb and investing in a streaming device instead, and utilizing local libraries for books, magazines, music, and movies.
The bottom line is that you must create a budget that allows you to live, cover your expenses, and set some money aside for your child’s future.
Preparing them for Adulthood
One of the most important things you can do to prepare a special needs child for adulthood is to establish a “Special Needs Trust” for your child. In some instances, families raising special needs children qualify for some assistance from the government, with stipulations and certain financial limitations. Creating this trust allows you to put savings, financial gifts, and any insurance settlements away to provide a financial future for your child.
It is important to put these funds into a trust so that the money is held secure for your child’s future without jeopardizing your child’s eligibility for federal benefits that help with the costs of his care. Mint reports that even as little as $2,000 in your child’s name can prevent your child from receiving SSI and Medicaid benefits.
Building a savings trust is the foundation for any long-term plans you will make for your child and one of the most important things you can do. Even if you do not have funds to invest in the trust now, create the fund, and invest a little at a time over the years (and encourage others to make gifts to the fund too). It will become the cornerstone of the financial provisions you leave behind to generate income for a special needs adult who may be unable to provide for him or herself.
Arranging Care when You are Gone
Make sure to create a will. That is critical while your child is young but also important as your child becomes an adult. The truth is that many special needs individuals who receive proper care and attention have conditions that will allow them to live long lives – meaning your child will likely outlive both parents. You need to have a plan in place to provide care for your child when you are no longer there to do so.
That includes designating a guardian for your child. When your child is young, this is the person who will provide direct care for your child while also making financial and medical decisions on behalf of your child.
The other person you need to designate in your will is the trustee who will be responsible for managing the funds of the trust so that your child has financial protection. The trustee will also determine investment choices for the money so it is important to choose someone who can make sound investing decisions.
Make Wise Investments
One of the first investments you need to make is an investment in life insurance that will provide financial assistance to your child if something happens to either or both parents. That is one of the most important investments you will make on behalf of your child.
Additionally, consider investments that provide easy liquidity and that can generate income. This includes things like real estate, which can generate rent and stocks that pay dividends.
The key is to start making plans now to safeguard your special needs child now and as he or she becomes an adult who still needs specialized care and financial support. These steps will help you get started on the right foot.