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Welcoming a new baby? There’s a lot to do, from packing the hospital bag to preparing the nursery. So it’s understandable if preparing financially sometimes takes a back seat. Here are five important financial moves to make if you’re expecting a baby.
Sort Out Your Heal Insurance
Health insurance is a major household expense for most Americans, and having a new baby means your insurance needs have automatically changed. This is why having a baby counts as a qualifying event, which means you have a chance to reassess and either add your baby to your policy or take out another, more suitable one.
Neither happen automatically though. You’ll need to make decisions either while you’re pregnant or shortly afterward. Most plans give you 30 to 60 days to add your child or change your plan, but it’s highly advisable to do it as soon as possible.
Consider the Worst Case Scenario
If something happens to you, you’ll want your child to be well cared for. Now is the time to consider getting life insurance if you don’t already have it (even those with no kids can sometimes benefit from it). Term life insurance can be particularly affordable for young healthy adults with children.
You’ll also want to make arrangements for what happens to your child in the event of your death. Morbid, yes, but necessary for your peace of mind. Typically you’ll make this part of your estate plan, naming a specific legal guardian who will take on care of your child if you’re not around.
Adjust Your Tax Forms
There are tax benefits to becoming a parent, so make sure you make the most of them. At the time of writing, there’s a tax credit of $2,000 per child to be claimed, but this could change so ask your tax professional for advice.
You might also want to consult a specialist financial planner, who can help you make the most of any potential financial benefits (and concerns) that having a child may present.
Consider a Dependent Care FSA if You’re Eligible
An FSA is a pre-tax savings account that’s sponsored by your employer. Contributions to it are automatically deducted from your paycheck, and the funds can be used for qualifying child care expenses such as daycare, preschool, summer day camp, and before or after school programs.
This account comes with tax advantages and the potential to save money on childcare, as well as a choice of payment and reimbursement options. Just remember that an FSA is a use-it-or-lose-it account. The funds don’t roll over to the next year if they’re not used, so look at what you expect to spend on childcare, make sure it’s qualifying care that the FSA will cover, then budget to pay in accordingly.
Look into a 529 Plan
Saving for your child’s college might be a long way from your mind when you bring your new-born home, but saving even a small regular monthly sum now will really add up over the next 18 years. A common way to save or your child’s future education is ta 529 plan. This is another account that provides tax advantages each year along with other potential incentives, and can eventually be used for qualified educational expenses.
While these plans are generally used to save for college expenses they can also potentially be used for elementary and secondary school expenses, such as enrolling your child in private schools or extra tuition. Check carefully exactly what your plan includes as a qualifying expense, and any terms or restrictions on how the money can be used, and plan accordingly.
Finances may not be top of mind as you adjust to being a new parent, or you may be focused on the typical (and considerable) short term expenses associated with having a baby. But it’s really worth looking into all of the above. Being proactive about finances will give you peace of mind and alleviate money stress later on.
About the Author
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine. Learn More About Karen
To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a conflict of interest when we favor their promotion over others. Read our editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.
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