Having a child is a huge life adjustment. Here are some ways to financially prepare for this exciting new chapter.
- Welcoming a new baby, especially your first, is a wonderful but stressful time. Auditing your finances in advance can help. Make sure your insurance is adequate. Learn what medical expenses are covered during and after pregnancy.
Some parents-to-be may also use this time to buy life insurance or disability insurance policies for worst case scenarios. On average, expect to spend over $250,000 on your child from birth to age 18, and that's if things go smoothly. Remember, much of what you buy in the beginning will be used for only a year or so. Now's the time to tap in to hand-me-downs and secondary marketplaces.
Evaluate your cash flow-- do you have adequate savings for the period when you won't be working? Know how much parental leave you have and how much of it is paid. Make an effort to pay down your debts, if any, before the baby's birth. Do you have investments that you can tap into if need be?
Financial institutions often have special loans, investments, and savings products geared towards expecting and new parents. Once your baby has joined your family, learn how to add your child to your health insurance and familiarize yourself with the plan's coverage. In the event of your untimely passing, it's important to have a guardian named, a will in place, and to create a trust or add your child as a beneficiary on any of your accounts.
Learn about the tax breaks available to new parents. This is where meeting with a tax advisor or financial planner can save you a lot of money. Some parents like to set up a special savings or certificate account for their new baby and add to it periodically. If you can, set up a stock or mutual fund account. You can open a custodial account in the child's name and shelter a certain amount of its income from taxes.
The best time to start saving for your child's education is when you discover you're going to be parents. You can save money, tax deferred, in 529 plans and Coverdell accounts just for educational costs. Stay financially fit, friends.