5 Essential Financial Moves for New Parents
Having a baby changes everything—including how you save and spend money. With so much going on after having a baby, it’s tempting to want to put off the financial piece of the puzzle until things settle down. But if you do, there’s a good chance you’ll keep pushing it down the road. These five tips are the essentials that will set you and your family on the right financial path after having a baby.
Adjust Your Budget—Whether you already stick to a strict budget or have never budgeted before, having a baby makes budgeting an essential. After all, you are now 100% responsible for the well-being of another human and even tiny people have lots of needs. Of course, you’ll need to account for things like diapers and baby clothes, but don’t forget other expenses, such as baby-proofing your home and paying for baby-sitters and daycare, if needed. If you’re not sure where to start, talk with friends or family members who have had a baby in the last few years to find out how they made the adjustment.
Investigate Insurance Options—When you add a baby to the family, you’ll want to look into getting additional insurance coverage, too. You’ll want to add your baby to your health insurance as a dependent. But that’s not all. You will probably want to purchase a life insurance policy for yourself if you don’t already have one.A budget-friendly term life insurance policy is a good “starter” policy. You can always change policies as your need, lifestyle and income evolves in the coming years.
Start Saving for College—It’s hard to imagine your little bundle of joy heading off to college someday, but those years will pass quickly. You don’t want to wait until your child is in high school to start saving for college. A 529 college savings plan is a simple, straightforward plan that allows you to maintain full control of the money in the account. Saving for college is essential so your child doesn’t have to rely too heavily on student loans to pay for their education.
Prepare a Will—As a new parent, the most important thing is ensuring your child is taken care of; whether you are there to do it or not. Estate planning, including preparing a will, medical power of attorney and living trust, helps to ensure your wishes are clear, and keeps your assets out of probate. As with your life insurance coverage, your estate plans are sure to evolve and need to be updated regularly as the years pass.
Build Up Emergency Savings—Everyone, single, married, with kids or without, needs emergency savings. But it’s especially important for new parents to start building up a robust emergency fund. You might think you know all the things that can happen in life, but kids add a whole new layer of potential emergencies and expenses. Start saving a little bit from each paycheck with an initial goal of saving 3 months’ living expenses. Once you hit that goal, keep going until you have 6 months of living expenses covered.