So here they are, my top 8 financial to-dos for new parents:
- Get life insurance: A good rule of thumb is to have 10x your gross salary saved. I generally recommend term insurance over permanent insurance.
- Update/Create an estate plan: This should include a will, power of attorney, updated beneficiaries, medical directive, and possibly a trust.
- Start saving for college: If you start when your child is born, investing approximately $500/month should be able to fund the cost of an average public university.
- Freeze your newborn’s credit score: This can help prevent identity theft of your newborn. You’ll want to do this for each of the three main credit bureaus, Equifax, Experian, and TransUnion.
- Update your health insurance: Make sure to add your newborn to your health insurance. Some parents may also wish to change to a plan with a lower deductible to help minimize risk.
- Research tax benefits: A quick scroll on Instagram will reveal tips for structuring your finances to accrue tax benefits with kids. You’ll want to look into some of these, among others: the Child Tax Credit and Child and Dependent Care Credit.
- Update your budget: A newborn baby can be a shock to your finances. Here are some common expenses to consider when updating your budget:
- Childcare: The average cost of daycare is $321/week. The average cost of a full-time nanny is $766/week. So it’s a good idea to call child care centers in your area to get a sense of what you’ll need—and how far out to reserve your spot.
- Daily newborn items: Diapers, wipes, formulas, bottles, clothes, toys, medicine, books—the list goes on.
- Healthcare: Depending on your health insurance, you’ll likely be paying more each paycheck.
- Rent or mortgage: Maybe you need more space, or are considering a renovation—or even a move to be closer to family.
- Discretionary spending: You may need to temporarily cut back on things like shopping, vacation, and dining out (probably not a problem with a newborn anyway) to make room for your newborn expenses.
- Increase your emergency fund: Once you’ve updated your budget and have a handle on your fixed monthly expenses, you will likely need to top up your emergency fund in order to still cover three to six months of expenses.
There’s a lot to consider when preparing for your newborn and their short-term and long-term needs. And of course, each family is different. What type of school your kiddos attend, when you start saving, and where you live will all play a role in the decisions you make.
But, as with saving for most things: Starting early can help you set your family up with a firm financial foundation that grows with your evolving needs.
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