Becoming parents is an exciting time but also comes with many changes. In between selecting a pediatrician and decorating the nursery, consider some of these tips to help be better financially prepared for your new arrival.
Before Your Baby Arrives
Before your new arrival, take the time to review your current spending and budget. Are there areas you can trim? Also, start estimating and budgeting for expenses related to your new baby like diapers, formula, clothing, and childcare related expenses. In the months leading up to your baby’s birth, do your best to get your financial house organized like setting up automatic payments of bills, paying down debts, and setting up an automatic savings plan to beef up your emergency fund savings.
Prior to your baby’s arrival, review employer benefits and policies. Review what parental leave policies your employer offers and how you may look to fill any unpaid gaps. Also, take time to review your current life insurance and disability coverages. A new addition to your family means that someone will likely be financially dependent on you. While your employer may provide some life insurance and disability benefits to you as an employee, these may no longer be adequate. A financial professional can help you determine your overall needs and discuss your options. Lastly, review your medical insurance coverage prior to the birth of your baby. Be sure to contact either your insurance carrier directly or your HR department to understand the procedure for when and how to add your baby to your health insurance plan.
After Your Baby Arrives
After your baby arrives, there are still quite a few things to plan for and take advantage of. One of the biggest expenses faced by parents is childcare. There are different options (each with their own various pro’s and con’s) that you may be able to take advantage of to help with childcare costs. Two options to consider include a dependent care FSA (if your employer offers it) or the Child and Dependent Care Tax Credit. Again, each of these two options has both benefits and drawbacks that a qualified financial or tax advisor can review with you so you can make an informed decision based on your personal situation.
Another major expense that is never too early to start planning for is college if this is an objective for you. Starting to save early, even if it is a little bit each month, can potentially pay off in the long run. A financial advisor can help explain some of the savings vehicles that are available to save for college and help you develop a savings plan based on your goals. That being said, while saving for a child’s college cost is important, it should not come at the expense of saving for your own retirement.
Lastly, with the arrival of your new baby, be sure you have your estate planning documents in order. If you have already drafted and executed documents in the past, it may be time to review and update as needed with a qualified estate planning attorney. If you haven’t drafted any documents, now would be an opportune time. A qualified estate planning attorney can help you formalize guardianship provisions should something happen to you. They can also help you review and update (if needed) beneficiary designations on financial accounts and insurance policies.
A new addition to your family offers a time to take stock of where you are right now financially and attend to some of the administrative things that sometimes get set aside. It is certainly an exciting time and taking care of some of the items discussed in this blog post makes good sense and can add to some well-earned peace of mind.
Securities and Advisory Services offered through LPL Financial, member FINRA/SIPC, a Registered Investment Advisor. LPL Financial and Croxall Capital Planning do not provide tax or legal advice. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.