Get life insurance for you, your spouse, and your child
Life insurance is critical for new parents. If you don't have a policy, now is a good time to get one - on both of your lives. If you already have an existing life insurance plan, then review your limits to make sure that you have enough to support your growing family should either one or both of you unexpectedly die. Now is also a good time to purchase a policy for your new baby. While there are many different types of life insurance to choose from, permanent* policies such as whole or universal life have the potential to earn cash value over time. That's money that can help fund things such as college expenses or a down payment on a first home.** Some policies may have a guaranteed purchase option that could allow your child to buy additional insurance in the future as an adult - regardless of his/her health.
Protect your income with disability insurance
Your income is your greatest asset. If you have a disability policy through your employer, find out how much coverage you have. For example, do you have a short-term or long-term policy? Disabilities lasting three months or longer are more common than you might think. Protect your income so that if you were to become sick or injured and couldn't work, you'll have enough income coming in to meet your financial obligations. You might even have the option of purchasing a disability income rider on a new life insurance policy outside of what your employer offers.
Start a college fund
There is no time like the present to start a college fund for your child. One way to begin could be with a 529 college savings plan. Not only can a 529 plan help you save more, but it can provide you with federal tax advantages (and in many cases, state tax advantages) as long as you use withdrawals for eligible educational expenses, such as tuition and room and board.
NOTE: As of 2018, the IRS has amended the term “qualified higher education expense” to include a limited amount of annual expenses from a 529 Plan for tuition at an elementary or secondary public, private, or religious school. Source: www.irs.gov/newsroom/529-plans-questions-and-answers.
Create a willWho would take care of your child if you both were to die? Creating a will and naming a guardian for your child ensures that they will be raised by someone who you would want to care for them. Without one, the court will make this important decision for you.
Update your beneficiary designations
From your retirement plans to your life insurance policies, now is a good time to update your beneficiary designations. Doing so ensures that your child will receive the proceeds in the event of your death. A growing family can mean a lot of changes. By taking care of a few financial matters today, you can help ensure that nothing slips through the cracks should a death or disability occur.
* As long as timely required premium payments are made.
** Loans against the policy accrue interest and decrease the death benefit and cash value by the amount of the outstanding loan and interest.