Expecting a new child is certainly a life-changing event. Along with the excitement and blessings of family, that new life has important financial implications. Certified financial planner Suzanne Himes, with Asset Planning Corporation, is here to discuss some of the changes that growing families should consider.
SUZANNE, THIS REALLY IS A SIGNIFICANT TIME FOR EVERY FAMILY. IN GENERAL, WHAT FINANCIAL ASPECTS SHOULD FAMILIES BE THINKING ABOUT?
Any life event is a good time to revisit our finances, and preparing for a new family member is a major one!
Having a child will impact:
- Insurance coverage
- Tax planning
- Education savings
- Estate planning
WHAT ARE SOME POTENTIAL BUDGET ISSUES THAT FAMILIES SHOULD BE DISCUSSING?
- Impact of maternity/paternity leave on savings and cash flow
- Do you or your partner want to stay home instead of returning to work?
- Studies indicate that the first child will have a greater impact on spending than subsequent children (buying food in larger, more economical quantities, re-using baby furniture, handing down clothing, toys, etc)
WHAT ARE A FEW ACTIONS IN THE OTHER AREAS THAT PARENTS SHOULD BE TAKING?
- Understand current health insurance coverage to plan for out of pocket expenses
- Review current life and disability insurance; update coverage
- Add a child to health insurance; deadline typically within 30-60 days of birth
- Update W-4 form with an employer to change withholding allowances
Consider the impact of:
- Child Tax Credit
- Child and Dependent Care Tax Credit?
- Adoption Tax Credit?
- Take advantage of time and start saving early.
- Ex: Consider using cash baby gifts to open a 529 savings plan account
- Update beneficiary designations
- Update Wills/Trusts; especially to designate guardians