How to Financially Prepare for a Child With Special Needs

Father helping daughter use coloring book

New parents face a slew of new expenses, from nursery furniture to diapers to daycare. But families with special needs children often experience additional and ongoing financial considerations, which can include expensive medical bills and specialized caregivers. These expenses may not be fully covered by insurance or government aid programs, and could greatly impact family finances.

Depending on the child's needs, the financial burden can be massive: Studies have found that the expenses associated with childhood disability can cost families nearly $70,000 per year. Additionally, parents may need to establish ongoing financial support to provide for their child after they're gone.

To help reduce financial stress, here are some steps that parents of special needs children can take to be financially prepared and look out for their child's financial future.

Financial Challenges Families Face

The costs of supporting a special needs child can vary significantly from family to family, depending on factors such as the child's condition and severity, the amount of medical and caregiver support needed, health insurance coverage, the parents' ability to work, and more. Here are three of the most common financial challenges special needs families encounter:

  • Employment challenges: Due to the cost of health care and caregivers, some parents choose to—or must—take on certain necessary duties themselves. This may require the parent to reduce their work hours, stop working or find a job that offers more flexibility but less pay. A reduction in household income can make it more challenging to afford other expenses.
  • Health care costs: While schools, government programs and health insurance may be able to provide some relief when caring for a special needs child, many parents find themselves with a large number of uncovered services and steep bills. Even if insurance does cover care or a device, the family may still face costly insurance premiums and expensive co-pays. Additionally, families may need to spend money out-of-pocket for specialized caregivers.
  • Care beyond your lifetime: In families without special needs children, it's expected the youth will eventually live independently and make enough income so they no longer need parental support. For many special needs children, however, their care requirements don't end at age 18. They may always require a medical device, or they may never be able to work or live independently. This leaves many parents in the position of not only trying to afford current expenses, but planning and saving for the future so their child will have the care they need once the parents are gone.

Actions Parents Can Take

Raising a special needs child can be demanding on a family's budget, but here are some strategies and resources that can help.

  • Get on a budget—and try to save. Money is often tighter for parents of special needs children, so creating and sticking to a budget can help ensure you have enough to cover your bills each month and, when possible, funnel any extra money into an emergency fund or other forms of savings. The Pacer Center, which offers resources for parents of special needs children, has a guide on organizing your finances that can help get you started.
  • Consult with an experienced financial advisor. Look for a Certified Financial Planner or other professional who specializes in working with parents of special needs children. For example, Protected Tomorrows, founded by a CFP, offers a virtual financial planning program for special needs families. If you can't afford to hire someone, the National Disability Institute's website is chock-full of financial resources, including LifeCents, a free online financial wellness program.
  • Work with a special needs planner. This type of professional helps families understand and plan for financial considerations, legal matters, government benefits and more. Special needs planners may be financial planners, lawyers or companies with teams that can help in several areas. You can find a professional in your area through the Academy of Special Needs Planners or Special Needs Alliance.
  • Seek out financial assistance. While a specialized planner can also help with this, make sure you've researched any available form of financial assistance for people with disabilities. This could include government resources that subsidize health care costs, home modification programs, education assistance opportunities or pro bono resources from charities and nonprofit organizations.
  • Set your child up for success. According to the Special Needs Alliance, tools such as a special needs trust or an ABLE account can be used to hold assets for a disabled person and pay for expenses without impacting their eligibility for means-tested government assistance such as Medicaid. An experienced lawyer or planner can help you find out how ABLE accounts work and determine which options are best. It's also important to ensure you have a will that puts your assets in a special needs trust; otherwise, if you pass away and your assets go directly to the child, it could make them ineligible for needs-based federal benefits.

Borrow Wisely

Financial emergencies can happen, especially for families whose finances are tight due to the costs of giving their special needs child the best life possible. When savings accounts, government programs and expert advice aren't enough, you may find yourself forced to borrow money. Before doing so—and even when things are stable and you don't need to take on debt—make sure your credit is in the best shape possible. That way, if you need to take out a personal loan or credit card to stay afloat, you're able to qualify for options with lower interest rates and better terms. You can get your free credit score and report from Experian to see where you stand and what steps you can take to improve your credit.

Planning ahead is key when it comes to your family's and your child's financial well-being. By budgeting, seeking financial resources and establishing savings, you can do your best to ensure a positive financial future for your child and your family.