A new baby can bring about a lot of changes to a family. In the beginning, you’re sleep-deprived, juggling naps and feeding schedules, and adjusting to life with your new addition. So before your baby takes their first step, take some of your own to ensure you make smart financial decisions from the start. See these tips on how to financially plan for a new baby.
Plan for New Expenses
One of the biggest expenses related to a new baby is childcare. As a first step, review your budget to financially plan for your baby and have an honest conversation with your partner about childcare expectations. Is daycare or a nanny feasible or will one spouse stay home? And if one parent stays home, consider the potential impact of an interruption in career path.
You should also review your savings buckets and make sure you have emergency savings built up. A good rule of thumb is somewhere between 3-6 months’ worth of expenses in conservative, liquid investments.
Update Your Estate Plan
Having a baby changes everything. If you haven’t created an estate plan, you will want to do so immediately. An estate plan consists of your will, trust, and guardianship documents to make sure that your baby is cared for in the event of your death and that your property passes to the right person. Sometimes the guardian for your child and your assets are different people- and that’s ok.
If you already have an existing estate plan, a new baby is a great reason to revisit and update your documents.
Start Saving for College Now
Now is a good time to establish a 529 plan, a tax-advantaged and low maintenance way to save for college and now private school tuition from elementary school onward. Most plans have automatic investments that allow you to ‘set it and forget it.’ Since each state offers its own plan, you should search for a plan that has low-cost investment options and low annual fees. But as a very important caveat, you should avoid putting education savings above retirement savings!
If you don’t have enough in retirement, your kids may have to bail you out down the road. Financially planning for your new baby can set you on a path that will benefit you and your family years into the future.
Consider Insurance – Both Life and Disability
Although adequate health insurance is critical, you will also want to give careful consideration to life insurance coverage and disability income insurance. Review your current benefits package and see what may be offered to you through your employer. You may consider increasing the coverage after taking a new baby into consideration.
Consult with a Wealth Manager
Becoming a mother or father can have a big effect on all of your life’s goals. You may find it’s the right time to work with a trusted wealth manager so that you can spend more time with your growing family. Our fiduciary financial advisors are professionals who can guide you in how to financially plan for your new baby, and prepare for all of life’s most important milestones. Contact ML&R Wealth Management for your consultation.