Introducing a newborn into the family brings many changes and adjustments, including financial ones. As a new parent or expecting parents, there are specific steps you can take to ensure your child’s future is secure and healthy. This checklist overviews essential financial considerations for new parents, from budgeting to college savings. Taking the time to review these items can help you create a secure financial future for your family.
- Review your budget
- Build an emergency fund
- Consider life insurance
- Review your health insurance
- Create a will
- Consider disability insurance
- Start saving for college
- Review your retirement savings
- Avoid debt
- Evaluate childcare options
Review your Budget: Create a budget that reflects your new family expenses, including the costs of raising a child, such as diapers, formula, baby gear, and childcare expenses. Be sure to factor in any reduction in income due to maternity or paternity leave. Remember to review your current budget expenses that may change, such as entertainment, taxes, and utilities. Keep in mind that your social calendar may be different now that you have a new baby.
Build an Emergency Fund: Set aside funds to cover unexpected expenses such as medical emergencies, car repairs, or job loss. Experts recommend having at least three to six months’ worth of living expenses saved up. You may want to increase your emergency fund if you expect one parent to take time off work.
Consider Life Insurance: If you’re the primary breadwinner, it’s crucial to have a life insurance policy in place to ensure your family’s financial stability if something were to happen to you. Consider a term life insurance policy with enough coverage for your family’s needs. This may be an excellent time to schedule a review of your insurance needs with a professional
Review your Health Insurance: Make sure your health insurance plan covers maternity and pediatric care. If not, consider switching to a plan that does. Additionally, make sure your coverage is current and covers any medical needs that may arise with a new baby.
Create a Will: A will is a legal document that outlines your wishes for your child’s care and inheritance if something happens to you. Seek legal advice to ensure your will is legally binding and reflects your wishes. This is probably also a good time to review the beneficiaries listed on retirement accounts such as 401Ks and insurance policies.
Consider Disability Insurance: Disability insurance can provide financial support if you can’t work due to illness or injury. Disability insurance can be especially important if you’re the primary income earner for your family. Please don’t overlook the need for disability insurance; you may be more likely to need it than traditional life insurance in the next decade or two.
Start Saving for College: Consider setting up a 529 college savings plan for your child. Start saving as early as possible to maximize compound interest and growth. There are several options for tax-advantaged college savings plans, so research your state’s options and seek the advice of a financial advisor to find the best fit for your family.
Review your Retirement Savings: Ensure you’re on track for your retirement goals, considering any additional expenses you’ll face as a parent. Consider taking advantage of any employer-sponsored retirement plan, such as a 401K or 403B. By starting early, you can benefit from compounding interest and have the peace of mind that your future is secure.
Avoid Debt: Avoid accumulating high-interest credit card debt, and pay off any outstanding balances as soon as possible. If you need to borrow money, consider low-interest options such as a home equity loan or personal loan. If you already have debt, consider talking to a financial advisor about setting up a repayment plan and exploring debt consolidation. Make sure you understand the terms and repayment options before signing any document.
Evaluate Child Care Options: Child care can be a significant expense for new parents. Evaluate your childcare options and research the costs associated with each one. Consider factors such as location, hours of operation, and quality of care. You may also want to consider options such as working from home or adjusting your work schedule to reduce childcare costs. Childcare subsidies may also be available, so research to determine if you qualify.
In conclusion, preparing for a new baby is exciting and stressful. Taking the necessary steps to ensure your family’s financial security is important. Create an emergency fund, review your insurance needs, create a will, consider disability insurance, and start saving for college. Additionally, strive to get out of debt and evaluate childcare options. With these steps, you can give yourself and your family the best chance for a secure future. And as I have heard many times, “Don’t sweat the small stuff.”
Author
Isaac is a Fee-Only (no products sold) Certified Financial Planner® Practitioner. Isaac founded Stalwart Financial Planning with offices in Fayetteville NC and Durham NC. Isaac provides comprehensive planning and investment management services to individuals from all walks of life. Isaac can be reached by phone at 910-867-8464, or by email (iallen@StalwartPlanning.com). Visit him at Stawart Financial Planning www.StalwartPlanning.com.