Financial planning isn’t exactly a barrel of laughs, but alas, it must be done. And you’ll sleep easier at night (when baby doesn’t have other plans) knowing certain tedious to-dos have been crossed off your list.
Health insurance is a high priority before, during and after baby’s birth. In most cases, your little bundle is covered under mama’s policy until after delivery, when she becomes her own insurable entity. Make sure to add baby to your insurance plan (or open a separate health insurance plan for her) within a week of her birth. Insurance companies are used to handling new-baby billing, so the transition should be a smooth one as long as you keep your provider in the loop.
Many expectant parents also establish life insurance policies (or adjust existing policies) before they welcome their little one.If you or your spouse were to pass away, a life insurance payout could keep your family afloat in your absence. While life insurance might be offered by your employer—and good for you if it is—consider purchasing an individual policy as well. Establishingan independent plan may allow you to have more say in the particulars, and you’ll be able to take it with you if you change jobs.
With the help of an insurance professional, decide on a policy type and select the amount of coverage you want—whether it’s just enough to pay for funeral costs or more than enough to maintain your family’s lifestyle when you’re gone. Consider the ongoing costs of your child’s daily needs as well as his future education; provide as much coverage as you can, but of course, keep the payments realistic for your budget. It may feel like you’re gambling on your own mortality, but it’s really more a precaution to ensure your child’s well-being. Losing a parent is hard enough without adding financial stress to the mix.
Planning for your own demise can seem fairly morbid, especially when you’re preparing to welcome a new life into your home. However, once you become a parent, having a will in place is more important than ever.
When it comes to estate planning, you really don’t want to cut corners. Even if you think you’re fluent in legalese, draft your will with an experienced attorney so you can be sure you’re covering all the bases. Your attorney will know which questions to ask and introduce all the necessary elements of a thorough last will and testament. You’ll need to pick a responsible executor, along with a trustee if you develop a children’s trust. The executor will be in charge of your estate after you die, initiating court proceedings, paying your debts, and distributing your assets. Your trustee will handle money or assets you choose to leave to your kids; you’ll want to determine how much of your estate will go to your children, and when they will receive it. Your executor and trustee can be the same person, or you can choose to separate the roles.
Why is drafting a will especially pertinent when you become a parent? It’s not fun to think about, but you’ll need to designate a legal guardian to raise your child in the event of your death. Many parents choose to leave their children to their spouse, but you’ll need to have a second-choice guardian lined up should you both pass away. If you don’t have family members who would be physically, financially and emotionally prepared to bring your child into their home, examine your list of close friends. Do you have a friend who shares your parenting values and is in the position to provide a good home for your little one? Have a talk with the individual or couple you are considering and make sure they feel comfortable with and capable of handling this huge responsibility.
If you haven’t been a saver in the past, now is the perfect opportunity to change your ways. There’s no time like the present to begin setting aside dollars for baby’s college education. Even if you don’t have a lot to sock away right now, begin a long-term savings plan and add to it (even in small increments) on a regular basis. Consider setting up automatic payments, so part of your paycheck will be transferred to savings without any further effort on your part.
While there are many ways to save, a 529 plan is a popular vessel for college savings. A 529 plan is a tax-advantaged savings plan especially designed to help you save for your child’s future schooling. You may purchase a plan through a broker or, to avoid sales fees, you may buy directly from the plan sponsor (usually a state or educational institution). To help junior’s college savings grow faster, think about inviting family to contribute; for example, have grandparents donate college dollars rather than giving birthday gifts. (Toys are fun for now, but an education lasts forever!)
It may seem ridiculously early to start saving for your tiny peanut’s diploma, but remember, every dollar you save now is a dollar for which you won’t have to scramble when college is right around the corner.