The pending birth of a new child, particularly if it’s the first for a couple, is unquestionably a life altering event. Being a parent requires a person to take a significantly different view of the world, given the responsibilities that they have to their new child.
Parenting also requires a couple to reassess their financial position and priorities. Make no mistake about it – raising a child is an expensive endeavor, complete with an entirely new set of financial challenges. And new parents will certainly find no shortage of advice and guidance on what you might expect when it comes to raising their new child.
A new parent should be sure that their lifestyle changes include the following banking advice tips as well.
Start a College Fund Immediately. Starting a college fund is probably one of the first things that most new parents think to do when they’re about to have a child. Certainly when average college costs are rising as quickly as they have over the past few decades, it’s essential that you give yourself as long as possible to save. You should consider dedicated college savings plans (such as the so-called “529 Plans”), but don’t limit your thinking to just those specialized vehicles.
Also consider any prepaid tuition plans that may be available in your state, as well as setting up separate investment accounts or IRAs that you informally earmark for educational expenses. The ability to take early penalty free withdrawals from an IRA to pay for a child’s educational expenses is a powerful but underutilized tool – just make sure you don’t sacrifice your own retirement plans in order to pay for college.
Review Your Health Insurance Coverage. It’s absolutely essential for your financial health that your health insurance contains an adequate amount of coverage for your new child. Medical care for a newborn can be quite expensive, even in the absence of any specific medical issues. Make sure your entire family is adequately covered; even a single illness or accident that’s outside your scope of coverage can be financially devastating.
Increase the Size of Your Emergency Fund. Even if you are adequately insured, you’re still likely to face an entirely new set of unexpected expenses that can pop up and disrupt your well-planned budget. As a new parent you should work to increase the size of your emergency fund, in order to protect against these types of expenses.
Update Your Will and Other Beneficiary Information. When you become a new parent, chances are you’ll want to update your will to include your new child. You may wish to add your child as a new direct heir, or provide for the creation of a trust for their benefit. And if you don’t currently have a will, then a new child should be just the catalyst you need to finally get one place.
Also remember that every one of your financial accounts – including your savings and investment accounts, IRAs and 401(k)s – has named beneficiary information that you may want to update as well.
You’ll probably face plenty of stress as a new parent. Follow the money tips above to reduce your financial stress and make parenting a little easier.
The pending birth of a new child, particularly if it’s the first for a couple, is unquestionably a life altering event. Being a parent requires a person to take a significantly different view of the world, given the responsibilities that they have to their new child.
