Having a new baby is a much-anticipated event. While growing a larger family brings added joy and love to your household, it can also wreak havoc on your finances if you don't properly plan. Being prepared financially can go along way to reducing stress and allowing you to enjoy the new life that you are bringing into the world. To help you get started, below are seven financial to-do's that new parents should consider.
One of the most important documents that should now be completed. Creating your Last Will and Testament not only ensures your finances but also serves to name Guardian(s) for your child(ren). Legally naming guardians is often overlooked, however, it is critical to have your finances and family in order in case the unthinkable were to happen. Don't have a will? Here's what could happen if you pass away without one.
Even if you have good health insurance coverage, the bill for having a baby can be an expensive one to pay. When you find out you are expecting, contact your insurance company and get a basic framework for 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 set a goal to save, so that you don't get underwater with medical bills after your new bundle of joy arrives. If you have a health savings account, be sure to adjust it so that you will have 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 the process to add your new little one to your policy as well.
3. Create a Baby Budget
Even if you have a fairly well-laid out budget, you will need to make changes to it to account for the additional cost of your newborn. If you plan on making payments for medical expenses, you will need to include that in your new budget as well as diapers, feeding supplies, clothing, and doctor visit costs. You may also want to consider starting your budget when you find out you are expecting and including a section where you work in the expenses of high-cost baby items such as a stroller or crib. If you plan to return to work, you will need to estimate your child care expenses as well.
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 the event something unexpected occurs. If you don't have a policy, now is the time to get one so that you can ensure your family is protected if you are no longer around. It is also a good time to address any other policies, such as disability insurance, checking all of the amounts to make sure that you and your new family are fully covered.
Find out what your employer covers for maternity or paternity leave and make sure to include savings in your budget so that you will have the amount of lost income during this time saved up. This will help you alleviate any strain to your budget after your little one arrives. If you don't plan to return to work, or plan to work only part-time after your leave, you will need to create an adjusted budget and make other adjustments to bridge the gap that your loss of income will have.
6. Start an Education Fund
While it may seem like college is a long way away, it can sneak up on you in a financial sense. College tuition is one of the largest expenses that families will face when raising their child and all too often savings fall short because many parents don't get started until later on in life. Starting early will help your money grow faster, reducing the amount that you will have to put into the account in the end.
7. Start or Increase Your Emergency Fund
It is always critical to have an emergency fund. This way if you suffer a loss in income, an expensive event, or unexpected major repair, you will have the funds to cover it without having to fall behind in bills or borrow against your assets. If you currently have an emergency fund, you will probably want to increase it as your financial need will be greater with a new baby.
Get your financial house in order before your little one arrives, so you can relax and enjoy your new addition without having to stress over your monthly bills.
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