Important Financial Steps Every New Parent Should Take
1) Add your child to your health insurance policy
You’ll want to make sure your little one is covered and if you get insurance through your employer, you may have a limited time to add your child to your policy. You may also want to switch to a lower deductible plan if you’re concerned about your baby’s potential health care costs.
2) Update your will, trust, and beneficiary designations
A will goes beyond just designating who will inherit your assets. It can also designate who will be the guardian of your child should something happen to both parents. The decision of who could end up raising your child is a pretty big one and not something you probably want the courts to decide if it’s not in your will. Your employer may even offer a benefit that allows you to draft a will and other basic estate planning documents for free.
3) Ensure you have adequate life insurance
Once you’ve decided who will take care of your child and what your child will inherit, you’ll want to make sure that your child has enough to live comfortably. That could be more difficult if they’re going to be raised by your spouse as a single parent than if their guardian is a rich uncle. The good news is that your family may qualify for benefits from Social Security if something has happened to you.
4) Plan for childcare expenses
You can estimate your childcare expenses here. If you don’t think you can afford it due to limited income, try contacting your state’s Childcare Program Office for financial assistance. Otherwise, see if your employer offers a dependent care FSA (flexible spending account) that you can contribute to pre-tax and use the money tax-free for dependent care expenses. That’s like getting a discount equal to your marginal tax rate. Just be aware that the FSA is use-it-or-lose so you don’t want to contribute more than you expect to spend that year.
5) Make adjustments to your budget
Of course, insurance and childcare aren’t the only additional expenses you may have. Kids are expensive, but there are some things you can do to make them a little less so. For example, it probably doesn’t make sense to spend a lot of money on clothing that they’ll quickly outgrow, especially when they’re too young to care what they look like anyway, so shop for baby clothes at discount retailers like Old Navy and Target and even consignment shops. You can also purchase used toys and baby furniture. They won’t know the difference.