6 Financial Steps New Parents Shouldn’t Overlook
When you have a new baby, it’s easy to get overwhelmed with everything you have to do. Everyone knows they have to save more money because babies are expensive, but there are a few other financial to-do items that you may be forgetting.
Add to Your Insurance
Of course, you’ll want to add your new child to your health insurance policy, but it’s also a good idea to bulk up your own coverage. Life insurance and disability insurance can protect your family if something happens to you.
If you already have disability insurance and life insurance, review your policies to make sure you have enough coverage to meet the needs of your growing family.
Plan for Emergencies
Add to your emergency fund so you can keep your household running smoothly in the face of unexpected issues. How much is enough? It’s recommended to keep three to six months of average income accessible for emergencies. Here are some tips on setting up an emergency fund.
Make the Most of Tax Breaks
Children are expensive but fortunately, they also entitle you to a few additional deductions and credits. The Child Tax Credit and Earned Income Credit are examples of tax breaks afforded to parents, and the Child and Dependent Care Credit can cover between 20%-35% of your child care expenses.
Another option is to set up a flexible spending account through your employer that will allow you to set aside money tax-free each year for qualified childcare expenses.
It’s Time to Make a Will
Once you have children, it’s crucial to have arrangements in place should something happen to you. A will provides a plan not only for the division of your assets but also for legal guardianship of your children.
You can change your will and beneficiaries at any time, but having a notarized will ensures there will be no confusion in the event of your untimely death.
Consider a College Fund
College is expensive, and that expense will continue to increase as time goes by. If you start saving for college right away, your child will have more options if they decide to go to college.
Plus, if you invest through a 529 plan, you can also use some of that money for qualified educational expenses before your child is college-aged, like paying for private school.
Prioritize Your Own Future
A caveat to the advice about college funds: if you have to choose between college saving and retirement saving, make retirement your priority. Your child will have options when it’s time to pay for college (student loans, scholarships, grants). Retirement saving, on the other hand, isn’t as easy to obtain. If your employer offers a 401k plan, it’s a great way to save for retirement without really having to think about it.
When you have a new baby, your focus is on giving the best care possible. But remember to handle these six tasks too. It will make a big difference in the long run.