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7 Financial Steps For Parents To Be Thumbnail

7 Financial Steps For Parents To Be

As you may or may not already know, my husband Jesse and I are expecting our first child in September. While we are so excited to begin this adventure, there are a lot of in-between steps we've been taking in order to prepare for our little one. While I've been advising others on the steps necessary to prepare for years, this is the first time I've had a taste of my own medicine when it comes to preparing for a new little one! Being prepared financially can go along way to reducing stress and allowing you to enjoy the new life that you are bringing into the world. To help you get started, below are six financial to-do's that new parents should consider.

1. Figure Out Your Health Insurance Coverages and Processes

Even if you have good health insurance coverage, the bill for having a baby can be an expensive one to pay. When you find out you are expecting, contact your insurance company and get a basic framework for what portions of the physician and hospital costs are covered and which ones you will need to pay out-of-pocket. From prenatal care to delivery, this adds up fast. If you're of "advanced-maternal age," like me, you may also have to factor in the additional expenses of visiting with high-risk doctors. Even though the determined amount is only a ballpark figure, it can help you set a goal to save, so that you don't get underwater with medical bills after your new bundle of joy arrives. If you have a health savings account, be sure to adjust it so that you will have as much as possible towards your medical costs while enjoying the tax break on your paycheck. When contacting your health insurance company, it may also be a good time to determine the process to add your new little one to your policy as well. If both partners have their own health insurance, make sure to read up on the birthday rule.  

2. Create a Baby Budget

Even if you have a fairly well-laid out budget, you will need to make changes to it to account for the additional cost of your newborn. Inevitably, I'm asked about our plans for the nursery or for our registry, but our biggest new expense is inevitably going to be childcare. Whether that means taking a step away from your career to work part-time, to become a stay-at-home parent, or paying for a nanny or a daycare, this is the biggest adjustment for most new budgets.  If you plan on making payments for medical expenses, you will need to include that in your new budget as well as diapers, feeding supplies, clothing, and doctor visit costs. You may also want to consider starting your budget when you find out you are expecting and including a section where you work in the expenses of high-cost baby items such as a stroller or crib. If you plan to return to work, you will need to estimate your child care expenses as well. 

3. Make Any Necessary Insurance Adjustments

If you have a life insurance policy, you will probably need to increase the value to have enough for the care of your child in the event something unexpected occurs. If you don't have a policy, now is the time to get one so that you can ensure your family is protected if you are no longer around. It is also a good time to address any other policies, such as disability insurance, checking all of the amounts to make sure that you and your new family are fully covered.

4. Make a Financial Plan 

Find out what your employer covers for maternity or paternity leave and make sure to include savings in your budget so that you will have the amount of lost income during this time saved up. This will help you alleviate any strain to your budget after your little one arrives. If you don't plan to return to work, or plan to work only part-time after your leave, you will need to create an adjusted budget and make other adjustments to bridge the gap that your loss of income will have. 

5. Make an Estate Plan

Find an estate attorney and start building your estate plan. Better yet, let's meet with them together. Create a will or a trust to plan for the worst case scenarios, but also create healthcare directives, a living will, and deciding what happens to your little one in the event you're unable. The peace of mind is in knowing there's a plan, even if you never have to use it. 

6. Start an Education Fund

While it may seem like college is a long way away, it can sneak up on you in a financial sense. College tuition is one of the largest expenses that families will face when raising their child and all too often savings fall short because many parents don't get started until later on in life. Starting early will help your money grow faster, reducing the amount that you will have to put into the account in the end. 

7. Start or Increase Your Emergency Fund

It is always critical to have an emergency fund. This way if you suffer a loss in income, an expensive event, or unexpected major repair, you will have the funds to cover it without having to fall behind in bills or borrow against your assets. If you currently have an emergency fund, you will probably want to increase it as your financial need will be greater with a new baby. 

Get your financial house in order before your little one arrives, so you can relax and enjoy your new addition without having to stress over your monthly bills. 

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.