It takes more than love to start a family—it also takes money.
There’s no doubt about it: Having children is an expensive undertaking. Children represent an emotional and financial commitment. Don’t go it alone; work with your financial advisor to prepare your finances for your significant life changes.
Create an emergency fund. You should start an emergency fund as soon as possible. Your goal is to save enough money to pay for three to six months of expenses. Having a newborn means spending more money for necessities to help you care for your baby. Those out of pocket expenses may add up over the months, and you may even have to dip into your savings to help cover those costs. An emergency fund can help cover unexpected expenses without you having to worry about not having enough money to buy diapers or clothes for your baby.
Redo your budget. In addition to the extra costs of a new baby, your income will take a hit if one parent reduces or stops work. Refigure your budget now and begin living on it so you can work out the kinks before the new family member arrives. Your budget should include paying down existing debt so that you have more financial freedom when you welcome your new family member.
Review your insurance. You might need to upgrade your health insurance. If you have an ACA policy, review it carefully and consider moving up a level to increase your coverage. Also, review your life insurance and think about having a policy in place that covers both parents. Finally, compose or update your will to specify your wishes if something should happen to you.
Update your long-term saving and investing plans. New parents are naturally concerned about paying for their child’s education, and it certainly makes sense to consider a 529 plan. However, don’t cut back on your retirement savings. Think of it this way: Do you want your grown child to have to support you in your golden years? Take advantage of your 401(k) or consider opening an Individual Retirement Account (IRA) to build your investments and potentially reduce your taxes.
Significant changes require careful financial planning. Your financial advisor can help you rework your finances as you start your new family. You’ll have plenty to worry about as a new parent, so let a professional manage your financial concerns.
We can work with you to help prepare your finances for the road ahead. Contact us today.