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Financial planning for children with special needs

When raising a child with special needs, you may face unique financial challenges and decisions when planning your future. Here’s what to know.

caring for a special needs child

As a financial planner and someone who recently had a second child, I can tell you that when it comes to raising and educating children, there are many financial concerns parents need to address. And, as an aunt to a special needs child, I’ve seen the financial challenges my sister and her family may face in their future and know that it can be overwhelming.

I still remember my sister tearing up the first time we had a discussion about what happens to him if something happens to her. That’s a hard enough topic to face for any parent, but when you’re factoring in a highly specialized level of care and attention that your child needs, the challenge can seem insurmountable.

For families with special needs children, each situation is unique. There is no “one-size-fits-all” plan or recommendation when it comes to your finances. However, there are some big-picture planning issues that you should consider, discuss with your partner, and loop in your family members (and financial planner if you have one).

Strategies and costs to consider now

There’s no way to get around the fact that you may (and likely will at some point) have increased expenses due to the additional attention required to provide for a special needs child. Although your hands may be full with day-to-day care, keeping an eye on your finances is a must in order to help you better navigate the future. If you haven’t been one to stick to a household budget previously, now is the time to gain clarity around what care is costing you, in addition to identifying areas where you can make adjustments to savings and spending.

Day-to-day care of special needs children can include everything from hiring professional caregivers, seeking out medical specialists and therapists, enrolling your child in private school, or working with a special education advocate.

Thankfully, you don’t need to carry this financial burden alone. Consider some of the following ways to help fund costs:

Medical insurance

Depending on your needs and the coverage you have, insurance may or may not cover all of your child’s medical and therapy expenses. Pay close attention to the benefits available to you, call in and ask questions whenever necessary, and keep a line item in your budget for these added costs.

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Government assistance

Your child may also be eligible for government assistance if they meet the Social Security Administration’s definition of disability. This could make them eligible to receive Supplemental Security Income (SSI) payments. Before your child is 18, the SSA takes into account the income of your child and other members of your household when determining thenumbert of your child’s payments. After they turn 18, only their income is considered. This extra income can be used toward day-to-day costs or stashed away for future assistance that will likely be needed.

529 ABLE

A 529 ABLE, also called a 529A, can help you save for your special needs child’s education, similar to 529 plans. Contributions are made with after-tax dollars, and you can withdraw money tax-free for qualified education and certain disability expenses. Be aware though that once the account has more than $100,000 saved in it, your child will no longer be eligible for SSI benefits.

Financial considerations for the future

It may seem counterintuitive, but one of the best ways to provide for your children is to put on your own life vest first. While there will certainly be strains on your cash flow when caring for a special needs child, it’s imperative that you start saving toward your own retirement as early as possible (in order to take advantage of compound interest.) Consider factoring the following into your monthly budget:

Emergency savings

This account — which is one every family should build — will ideally account for 3-6 months of your “must have” expenses (i.e. what you need to keep a roof over your head and food on the table). You won’t reach the number overnight, so work in a small amount of savings to your budget to add to this account over time.

Retirement savings

Retirement is inevitable. Your options include leveraging your company’s 401(k) plan (consider contributing enough to get any company match) or stashing away into a Traditional or Roth IRA. Aim to set aside 5% of your income to start and work your way up to 10-15% of income over the next 3-4 years.

Future care for your child

It’s hard to estimate this number, but anything can and will help in the future. Aim to set aside $50 – $100 per month into a separate savings account for this goal.

529A contributions

This should be considered after you’ve maxed out retirement and other savings goals. If there is room in your budget, even $25 – $50 per month can help.

Create a financial backup plan

“What happens to my child if I die?” is a question that weighs heavily on the minds of special needs parents. And really any parent for that matter. Insurance can serve as a vital financial back-up plan if you were no longer around.

While many assume they’re covered by various types of employer-provided insurances, the reality is that this coverage is often not enough. Consider supplemental coverage for the following:

Disability income insurance

This coverage pays you a monthly benefit to replace a portion of your income if an injury or illness prevents you from working. This can help keep your family financially afloat until you can work again, or in the event you’re totally and permanently disabled.

Life insurance

Life insurance coverage helps financially protect your family if you were to pass away. It’s something that anyone with a dependent should consider. If you have a special needs child, consider increasing the coverage amount of your policy to account for your child’s additional care expenses, which may include things like:

  • Food & housing
  • Medical care
  • Prescription drugs
  • Therapy
  • Caregiver (Full or part-time)
  • Transportation
  • Schooling
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Long-term care strategies

While your focus may be on how you’ll provide for your child or children, It’s important to consider your own future as well.  Keeping long-term care strategies, including the possibility of purchasing long term care insurance, on your radar as you age is important.

Other ways to protect your special needs child

No one likes to think about their own death, but when you have dependents, especially those who require a high level of specialized care, the best gift you can give them is a detailed estate plan. This ensures that even if you’re not around, your wishes and requests are documented and detailed for their care going forward.

Even if you’re facing budgetary concerns, you can still keep costs under control by starting with the following basics and building over time:


Work with your attorney to create a will that names a guardian for your child. You can include a Letter of Intent, which can specify things like your child’s daily, weekly, and monthly routine, their likes and dislikes, contact information for their doctors, and other details. It’s a good idea to update this letter annually.


Consider creating a special needs trust for your child. Any assets placed into this trust won’t affect their ability to receive SSI benefits (however, they won’t receive benefits if their assets are greater than $2,000), so it’s important that any inheritance from you or other relatives lists the trust as the beneficiary — not your child. Assign a trustee to manage the assets in the special needs trust after your death. It’s possible to name a family member as the trustee (though many people opt to pay a professional).

Adult guardianship

If your child is unable to make their own medical and financial decisions after they turn 18, speak with an attorney about how you can become your adult child’s legal guardian, or create a power of attorney and health care proxy. This will legally allow you to make decisions in the event of an emergency. Don’t assume you have these powers automatically because your child is disabled. In the eyes of the law, they’re an adult once they turn 18.

Estate planning is complex and laws vary from state to state, which is why you want to ensure you’re creating documents that will hold up in court. Look for an estate attorney licensed in your area or consider asking a financial planner or a CPA for a few recommendations of good estate lawyers.  Interview a few candidates, and you’ll find the one that’s right for you.

Financial planning when you have children with special needs is never easy. It can be frustrating. And uncomfortable.  And emotional. But being proactive and addressing these tough questions now will help ensure that you and your children are well cared for, physically and financially. The best way to get started is to speak with a trusted professional who can provide resources and advice tailored to your situation.

Mary Beth Storjohann, CFP® and Founder of Workable Wealth, is an author, financial planner and accountability partner working to help clients in their 20s-40s across the country make smart, educated choices with their money. Her recent accolades include the “Top 40 Under 40” by Investment News, “10 young Advisors to Watch” by Financial Advisor Magazine, and “10 of the Best Personal Finance Experts on Twitter.” She frequently appears on NBC as a financial expert and her expertise has been featured in The Wall Street Journal, CNBC, Forbes and more.

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The information provided is not written or intended as specific tax or legal advice. Haven Life is not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.

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About Mary Beth Storjohann

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

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