Financial Considerations for Exchange Students and Foster Care
Many families wish 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 their family, however the arrangement requires some planning. When considering becoming a foster parent, be sure to anticipate the potential financial impacts as well.
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 on your budget.
Adoptive parenting
If you already have experience raising children, you know how expensive it can be. The situation may be different when caring for foster children. Most families will be reimbursed for at least some of the costs they incur, including medical and dental care, which are normally paid by the state. Although it is important to note that the level of reimbursement may vary depending on your state of residence, the age of the child, the number of foster children in your household, and other factors. Be sure to check with the appropriate agency in your state to find out the level of financial support available if you are considering a foster parenting role.
Regardless of the reimbursement you may receive, the reality for many foster families is that the costs of care will likely exceed that amount. Keeping this in mind in your financial plan will go a long way in ensuring that you are in a strong position to fulfill your responsibilities as a foster parent.
Hosting a foreign exchange student
Hosting an exchange student is a different level of commitment, but it is not without a financial impact. Exchange students tend to stay for the duration of their program, which is likely to be a semester or a school year. These students are generally older and can handle their daily responsibilities on their own.
In most cases, the student’s program will cover the cost of health insurance, school fees, and extracurricular activities. Additionally, many students will have their own money to pay for souvenirs, school lunches, entertainment, and other typical school-age expenses.
However, you will want to be in a financially strong position to provide the right environment for exchange students. They may depend on you for things like transportation to events as well as living space. If you include them in family activities, that can also increase your expenses. Host families may qualify for a modest tax deduction to help offset some of the costs associated with housing a foreign exchange student. Be sure to check with your tax advisor for more information.
Have your financial house in order
Before you commit to becoming an adoptive parent or host family, you need to be prepared from a financial perspective. Some of the steps to consider include:
Expanding Your Emergency Fund: 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 can mean additional unexpected expenses, so consider having additional funds available beyond this standard.
Keeping up with your other financial priorities: As you update your budget to reflect your newest 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.
Understand the program or the child’s 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 home in order before accepting a foster child or exchange student will help create a more positive experience. If your home and family are ready, make sure your finances are too.