Anticipating the arrival of a new baby can be exciting and terrifying all at the same time. There seems to be so much to do with so little time before they arrive, and life will never be the same once they get here. To help you make sense of what to do from a personal finance standpoint prior to and after their arrival, we’ve compiled this list of things to consider when having a baby.
Start Saving for College
The sooner you can begin saving for college, the better chance you’ll have at being able fully fund your targeted amount. Common savings accounts for this purpose include 529 plans, Coverdell ESAs, and UGMA & UTMA accounts.
Evaluate Health Insurance Choices
If both parents have health insurance through their employer, be sure to evaluate your different options. It may be more cost effective to be on a family insurance plan than having each spouse remain with their own employer’s plan.
Contribute to Health Savings Accounts
If your health insurance plan is considered a high deductible plan, you may be eligible to contribute to an HSA. This allows you to contribute pre-tax dollars to the account to pay for medical expenses for the family. Unused balances at the end of the year roll over to future years.
Utilize Child Care Reimbursement Accounts
These let you divert up to $5,000 per year into a special tax-advantaged account to help pay for child care bills. Whether you’re using daycare or a nanny, having this flexible spending account can reduce your tax liability and save you money.
Check your Tax Withholding
A new baby also means a new tax exemption. Make sure to have the appropriate federal and state tax withholding elections based on your income level and number of dependents.
Review Your Life Insurance Needs
Performing a life insurance needs analysis can help you determine how much coverage is necessary to ensure your family’s security if you were to pass away unexpectedly. Having proper coverage could help your surviving spouse fund college, pay off a mortgage, and cover the cost of childcare in order to continue working.
Review your Disability Insurance Coverage
During your working years, your biggest asset is arguably your ability to earn money. If you become unable to earn a living, your family could be severely impacted if you do not have short term and long term disability insurance. If your employer does not offer it, seek professional assistance to compare rates and coverage levels for purchasing coverage on your own.Draft Estate Planning Documents
If you haven’t already drafted some basic estate planning documents like wills and powers of attorney, now would be a good time to meet with an attorney to do so. Specifically, you want to make sure your desired plans for your child’s custody and care are spelled out in writing if something were to happen to you and your spouse.