The process of divorce changes the dynamics of nearly every aspect of family life. Finances, in particular, take a hard hit during the divorce settlement. Parents not only have to create a co-parenting strategy that accounts for visitation time and custody rights, but they also have to determine a course of action for managing child-related expenses until their children are adults.
For example, some parents agree that one party will purchase all back-to-school supplies and essentials for their education while the other party agrees to pay for extra-curricular fees. Given the fact that every family is different and all circumstances are unique, these financial plans vary from case to case.
In the aftermath of a divorce, both you and your spouse will be navigating a new financial landscape. Rather than taking each financial decision related to the children as they arise, it’s important to create a plan that will help both of you effectively budget without sacrificing the needs or wants of your children.
During the settlement process, you and your spouse will agree on the amount of child support that is necessary. The amount of child support that must be paid or that will be received depends upon the custody agreement, the financial income of both parents and the household expenses that the family is responsible for. For the most part, child support is designed to provide the child with the financial means necessary for essentials, such as housing, clothing, food and child care.
There are additional expenses, sometimes referred to as extraordinary expenses, that go above and beyond the basic needs of a child. This might include the cost to go to summer camp or the fees associated with a sports team. Parents should evaluate these expenses each year, and determine which party will be responsible for which fees throughout that year.
It is not unheard of for some divorcing couples to continue child support obligations through the college funding years. But what about cases where the child decides not to go to college following graduation from high school? Will there still be an expectation that the money should go to the child for some other venture?
Many parents find that their financial support extends well beyond the first 18 years of a child’s life. In fact, more and more young adults are relying on their parents to help pay for their rent or mortgage, to cover their utility costs or to pay for health insurance. As this trend continues, divorced parents are going to want to discuss how they will proceed into the future.
According to the Associated Press, an increasing number of parents are providing their children with the money they need to start up a business. Financial experts often warn parents against this practice, because in many cases these businesses fail before they ever have a chance to get off the ground. Divorced parents, who may be dealing with more difficult or complex financial situations, should be wary of lending too much to their adult children to start a business. Parents need to verify that they have what they need to survive before they give away their savings to their children.