With all the things you must do to prepare for the arrival of a new bundle of joy, one of the most important is financial preparation. Adding to your family can make a mess of your finances if you don't plan correctly. Being prepared can go a long way toward reducing the stress of adapting to your new situation. You want to enjoy the early days and months of parenthood as much as possible. Below are six financial to-dos’ that new parents should contemplate.
1. Look at Your Health Insurance
Even if you have good health insurance coverage, the bill for having a baby can be high. When you find out you are expecting or adopting, contact your insurance company to learn what portions of the physician and hospital costs are covered and which ones you will need to pay out-of-pocket. Even though the determined amount is only a ballpark figure, it can help you start saving so you don't get underwater financially after your bundle of joy arrives. If you have an HSA, be sure to adjust it so that you can put as much as possible towards your medical costs while enjoying the tax break on your paycheck. When contacting your health insurance company, it may also be a good time to determine how to add your family addition to your policy.
2. Make a Baby Budget
Babies are expensive. Even if you are used to budgeting, you will need to make changes to account for the additional cost of your newborn. If you plan on making payments for medical expenses, you will need to include them in your new budget, along with diapers, feeding supplies, clothing, and doctor visits. You may also want to consider starting your budget when you find out you are expecting and including a section where you work in high-cost baby items such as strollers and car seats. If you plan to return to work, you will need to estimate your childcare expenses as well.
3. Make Life Insurance Adjustments
If you have a life insurance policy, you will probably need to increase the value to have enough for the care of your child in case the unexpected happens. If you don't have a policy, now is the time to get one so that your family is protected if you can no longer provide for them. It is also a good time to address any other policies, such as disability insurance, checking all the amounts to make sure you and your new family are fully covered.
4. Make a Financial Plan
Find out if your employer covers for maternity or paternity leave and make sure to include savings in your budget so that you can replace lost income during this time. This will help you alleviate any strain to your budget after the baby comes. If you don't plan to return to work, or plan to work only part-time after your leave, you will need to adjust your budget to bridge the gap your loss of income will create.
5. Start an Education Fund
College is shockingly expensive. While it may seem a long way away, college can sneak up on you financially. College tuition is one of the largest expenses that families will face when raising their child. All too often savings fall short because the parents don't get started soon enough. Starting early will help your money grow faster, reducing the amount that you will have to put into the account when your child leaves home.
6. Start or Increase Your Emergency Fund
An emergency fund is essential for everyone. If you suffer a loss in income, an expensive event, or unexpected major repair, you will be able to cover it without having to fall behind or borrow against your assets. If you currently have an emergency fund, you will probably want to increase it, as your financial needs will be greater with a new baby.
Get your financial house in order before your child arrives, so you can relax and enjoy the dramatic life change without having to stress over bills.
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This content is developed from sources believed to be providing accurate information and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.