Welcoming a new baby is an exciting experience. You’ll be getting your nursery set up and learning all the ins and outs of baby care. Your goal is to make your newborn’s day-to-day existence as comfortable and nurturing as possible. Making sure your child’s financial security is squared away is also an important step for new parents. Once you and your baby have settled into your new routine, here are five quick and easy tips to set your new family up for financial success.
1. See what benefits you have at work
You probably know about your maternity or paternity leave policy, but are you aware of all of the benefits that your workplace offers? Some companies offer extended unpaid leave, pre-tax flex-spend accounts (FSAs) for child care, health insurance for your little one, life insurance, and various other perks. Make sure you schedule time with your company’s HR department to understand all of the benefits available to you.
2. Draft a will
Now that you have a child, it’s time to draft a will. Having your wishes legally documented ensures that if something should happen to you and your partner, your children will be raised by the people you choose and your money will be used as you intended. There are plenty of online resources that can help you draft a legally binding will very easily. You might want to check out services like Willing.com or Legalzoom.com to help you get started with an easy-to-fill out template. Consulting with an estate planner can also be helpful if you want to consider a living trust.
3. Start budgeting
Taking care of the everyday needs of small humans adds new expenses and line items to your budget. If you’ve never budgeted before, this is a good time to start. You know your usual expenses: mortgage/rent, utilities, food, entertainment, household and auto maintenance. Once baby arrives, factor in how much you will be spending on childcare, formula, diapers, education, etc. so you can adjust your spending and budget accordingly. There are plenty of free spreadsheet templates online that will help you keep track of your finances.
4. Start saving for college
College tuition can cost a bundle, so many parents like to start saving early so they can comfortably reach their college savings goals. Opening a savings account in your child’s first year, and making a monthly contribution for the next 18 years is one way to get ahead of the curve. You may also want to make an appointment at your bank to learn more about setting up a 529 plan — a tax-advantaged investment vehicle designed to save for the college expenses of a designated beneficiary.
5. Get a life insurance policy
While you may already have a life insurance policy included in your benefits package at work, the coverage may not provide enough financial support for the long haul. Life insurance policies offered by employers are often just 1-2 times your annual salary, whereas many experts recommend getting anywhere from 5-10 times your annual salary to make sure that your family is fully covered. Getting a policy above and beyond what work offers also ensures you have coverage if you leave that job for any reason. If you’re a new parent, doubling down on your coverage is a very smart move, and we at Ladder would be glad to walk you through the process. Start out by calculating how much coverage you need, then get a quote to you can see just how affordable a policy can be.
Becoming a new parent is an exciting milestone. By checking these financial items off of your to-do list, you can sleep soundly knowing your family will be well taken care of.