Becoming a foster parent is an incredibly rewarding experience, but families aren’t always prepared for the additional financial responsibility that comes with fostering a child. While it’s true that you will receive some money from the state to support your foster child, this may not be enough to cover all of your care costs. Don’t let this hold you back! Good financial planning will ensure you have the resources you need to provide for your foster child.
Consider the Costs
Before you decide to foster a child, make sure you’re clear on all of the expenses involved. State subsidies are intended to cover things like food, housing, clothing, and transportation for your child, but there are other expenses that you will have to pay out-of-pocket. For example, you may have to pay for health and background checks or make home safety upgrades to ensure your space is suitable for a child. Compared to adopting a child, however, these expenses are fairly small.
Ongoing expenses, on the other hand, could become a problem. PopSugar explains that the money you receive to foster a child typically doesn’t cover things like school pictures, field trips, sports, summer camp, entertainment, or vacations. You may also have to pay for daycare out-of-pocket. And don’t forget to account for the added utility costs!
Develop a Budget
Creating a budget will ensure you’re prepared to cover the real costs of fostering a child. To get started on your monthly budget, add up all of your reliable income sources, all of your fixed and varying expenses, and calculate what you have leftover. If you don’t have enough left to cover the additional costs of caring for a foster child, you will have to make some budget adjustments—try cutting your cable bill or canceling memberships you no longer need. The Balance recommends further tracking your spending against your budget to ensure that you’re not overspending in any one area.
Build an Emergency Savings
Everyone should have an emergency savings fund. Foster parents, in particular, need to be prepared for all kinds of emergency expenses that could crop up at any point. What if your kid gets sick and you have to take time off work to care for them? During unexpected events like these, you can dip into your emergency savings fund so you can avoid taking on debt or drawing money from your long-term savings. You can even use your emergency fund for unexpected home repairs, car repairs, and medical expenses.
Prepare for Tax Season
Taxes get a little more complicated when you become a foster parent. Take care to do your taxes properly so you can get all of the tax breaks and benefits that you’re entitled to! If your foster child is through an authorized agency like The National Foster Parent Association, you can claim them as a dependent on your taxes.
You may be able to deduct any unreimbursed foster care expenses as charitable donations. Also, J.K. Lasser points out that your foster care subsidy is non-taxable, so you may not have to report it on your tax return.
Keep in mind that you can always hire someone to help you with your personal finances. For example, a freelance accountant can help you manage your bills, meet your savings goals, and organize your records for tax season. Online job platforms like Upwork are great for finding experienced freelance accounting professionals!
Financial planning is essential for any new parent, whether you’re having a baby, adopting, or fostering a child. Secure your finances to ensure you can provide for your foster child as long as they are in your care. Thanks to your good planning, you can go above and beyond to provide the best possible life for your child!