Financial considerations when taking in foster children
My wife and I have considered taking in a foster child. What type of issues would this raise financially?
Many families have a desire to extend the warmth of their home to foster children and foreign exchange students. For many, welcoming a new child or student into their family can be rewarding — for both the child and your family — however the arrangement does require some planning. As you consider becoming a foster or host parent, make sure you also anticipate the potential financial impacts.
First, think about the lifestyle you want to provide for the student. What experiences, family traditions or activities do you want to share with the child? How do you envision everyday life with the new addition? The answers to these questions will help you prepare for the impact to your budget.
Foster parenting
If you already have experience raising children, you know how expensive it can be. The situation can be different when caring for foster children. Most families will be reimbursed for at least some of the costs that they incur including medical and dental care, which is normally paid for by the state. Although it is important to note that the level of reimbursement can vary depending on your state of residence, the age of the child, the number of foster children in your home and other factors. Be sure to consult with the appropriate agency in your state to find out the level of financial support available if you are considering a foster parent role.
Regardless of the reimbursement you may receive, the reality for many foster families is that costs of
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care will likely exceed that amount. Accounting for this in your financial plan will go a long way in making certain you are in a strong position to meet your responsibilities as a foster parent.
Hosting a foreign exchange student
Our family hosted a student from Germany last year and it was a great experience.
Hosting an exchange student is a different level of commitment, but it is not without financial impact. Exchange students tend to stay for the length of their program, which is likely a semester or a school year. These students are generally older and able to manage daily responsibilities on their own.
In most cases, the student’s program will provide for the cost of health insurance, school fees and extracurricular activities. Additionally, many students will have their own spending money to pay for souvenirs, school lunches, entertainment and other typical expenses for a school-aged child.
Nevertheless, you’ll want to be in a financially sound position to provide the right environment for exchange students. They may be reliant on you for things like transportation to events, as well as living space. If you include them in family activities, that may also add to your expenses. Host families may qualify for a modest tax deduction to help offset some of the costs related to housing a foreign exchange student. Be sure to consult with your tax advisor for more information.
Having your financial house in order
Before you commit to becoming a foster parent or host family, you want to be prepared from a financial perspective. Some of the steps to consider include:
• Expanding your emergency fund: The conventional wisdom is that you should have three to six months worth of living expenses set aside in your cash reserve. Having additional children in your care may mean additional unexpected expenses, so consider having extra funds available beyond this standard.
• Keeping up with your other financial priorities: As you update your budget to reflect your new addition, make sure you continue to fund your own financial goals, such as saving for education costs, paying off your home mortgage or your retirement.
• Understanding the child’s program or financial situation: Know what costs are covered by the state (for foster care) or the program (for exchange students) and update your budget accordingly.
Having your financial house in order before taking on a foster child or exchange student will help you create a more positive experience. If your home and family are ready, make sure your finances are as well.