It's not just about the toys, baby showers and cute outfits. When you become a parent, your outlook on life can shift dramatically. Suddenly, you have someone very special in your life you need to care for over the long term — and that includes both of your financial futures. If you're a new parent, you have a lot of decisions to make, especially when it comes to your finances and budgeting for baby. From starting a college fund to creating your will and securing life insurance, figuring out what you should be doing and when can feel overwhelming.
Family financial planning for new parents
Family financial planning is the process of outlining your long-term financial goals and building the roadmap to achieve them. When you have a family, there are multiple financial milestones that you may need to consider such as buying a house, saving for college, planning for retirement, and preparing for unexpected expenses. Family financial planning involves putting pen to paper and outlining tactical steps now that will help you achieve your financial goals in the future. These financial considerations for new parents can help get you started.
Create a family budget
Anyone can create a budget, but as your family expands, it becomes even more important to stay on top of your finances. You can use it to track everything from the costs of diapers to savings on back-to-school supplies, to your savings for childcare. Since a budget is the foundation of a good financial future, it's also a good practice for your kids to learn as they grow. Smart money management and building a small savings account are great ways to have your kids learn about finances from an early age.
Build an emergency fund
Having an emergency fund to deal with unexpected expenses is critical for anyone. Whether your car breaks down and needs repair or you have an accident and incur an unexpected medical expense, things happen in life and an emergency fund helps ensure you are prepared. Once you have children, having an emergency fund becomes even more important to ensure financial stability in case of a job loss or major setback.
Advice on the amount you save in your emergency fund varies. One idea is to start with a small goal, such as setting aside $1,000 for an unexpected expense and then building savings over time. With a family to care for, you may consider socking away several months’ worth of living expenses so that bills, food and housing can be paid for over the course of several months in the case of a job loss.
Think about saving for collegeWhen your baby is just a few weeks old, the idea that someday they'll head off to college seems so far away. Ask any parent, and they'll tell you time flies and that day arrives much sooner than you think. That's one reason why it's important to consider how you're going to pay for higher-education now. Costs of college will continue to rise, and starting a 529 college savings plan is one way to help you save for the big day. Start early when it comes to planning how you'll save for college.
Consider life insuranceA lot of young parents think they don't need life insurance. After all, if you're young and healthy, what's there to worry about? Unfortunately, the unexpected is always lurking around the corner. With children in the picture, many parents want to make sure they are taken care of in case something happens to them. Your life insurance death benefit can help your family pay for your funeral expenses, as well as any debts, your mortgage and college expenses. If your considering purchasing life insurance, start by getting a quote.
Explore disability insurance
Your life insurance policy is there to help protect your family after you pass, but what happens if you're injured in an accident or get ill and can't work for a few months? That's where disability insurance can help. With disability coverage, you can still get a percentage of your income over a set period. So, if you can't work, you won't completely lose your income — which could be financially devastating for many families. It's important to note that qualifying conditions will apply to a disability insurance policy.
Update your medical insurance
Medical expenses can add up quickly and babies and young children can have lots of medical needs. For this reason, it’s important to get medical insurance for your baby. Often, employer medical insurance programs automatically cover the baby for a certain period after birth (14 days is common). However, you’ll want to contact the insurance company to add your baby to the program as soon as possible. Keep in mind that having a baby is typically a “qualifying life event” that provides a window of opportunity for you to change or upgrade medical plans. Take time to evaluate your needs with a new baby and select the medical insurance that is best for you.
Review your estate planning
As your family expands and new big life moments, such as marriages and kids come into the picture, it's always a good idea to review your long-term estate planning. If you have a plan in place, you might want to update your will and beneficiaries to include your newest family members. If not, now is a good time to start the estate planning process. Creating a will is one way you can help protect your family even after you've passed.
Parenting is one of the most rewarding things you can do in life — focusing on your family's financial future can help give you peace of mind that they'll be protected now and into the future. Parents or expecting parents can reach out to a financial professional if they need advice.
Ready to start planning? Check out this financial checklist for having a baby.