Congratulations on The New Baby! Financial Planning Steps to Consider
By Ann D. Blakey, CFP®
Before your beautiful new baby turns 18, you will have spent nearly $233,610 on child-related costs. It’s worth every penny, of course, but the last thing you want to worry about is how you are going to afford all this! The good news is, there are simple steps you can take now to financially prepare yourself. Acting on these steps even before your baby arrives (if possible) means you can spend more time basking in newborn bliss and less time worrying about your finances.
Think about and make a list of the financial changes that may happen once the baby arrives.
- Do you have paid or unpaid maternity/paternity leave?
- Will a single parent or one/both of a couple choose to stay home past the period of paid leave?
- How will your childcare choice be funded?
Beyond childcare, there are other normal costs of raising a child you can plan for such as clothes, diapers (lots of diapers), and baby gear. But also, it is appropriate to consider planning and saving for the unexpected -- perhaps a delivery that doesn’t go as intended, additional medical costs, or an unanticipated loss of income.
If the amount in your current emergency fund makes you nervous, save more now. As your family grows, you’ll feel more comfortable having that added cushion to help you manage unexpected expenses. Couples should have at least 3 months of your expenses set aside and 6 months of expenses if you are single.
While things are calm, review your health insurance coverage. When looking over your policy, evaluate the cost of:
- adding your baby to your insurance plan
- any changes to premiums, deductibles, and copayments
- extra doctors’ visits for prenatal care, childbirth, and post-delivery checkups
If there are two parents and both have employer-sponsored health insurance plans, compare the costs of having your baby on either plan and decide what works best for your family. In the beginning, you might worry about even small health problems, so account for those unexpected trips to the pediatrician or urgent care as well.
Make sure to review your current life insurance policy and increase the coverage if needed. The amount of your current policy should factor in the number of years you want your income to replace, current debts, and funeral costs. Now that you have a dependent, you’ll also want to account for child-related expenses like college costs.
If you haven’t already created a will, now is definitely the time to do so. A will ensures your child is taken care of in the event something happens to you. Yes, it protects your assets, but it also outlines a plan of care for your child. You do not want to leave that all-important decision up to a court to decide.
Let’s look at the average cost of college tuition, fees, and room and board for the 2020-2021 school year:
- $21,180 per year for a public in-state four-year college
- $38,640 per year for a public out-of-state four-year college
- $50,770 per year for a private four-year college
Yes, college can be brutally expensive, but there are many options. Starting a college fund, such as a 529 Plan, for your child as soon as possible will help you avoid being blindsided. Even if you can only save small amounts, it can quickly add up with the help of compound interest and time. If you’re unsure about which college fund may be right for you, we are here to discuss a path appropriate for you.
Financial planning becomes even more important with children. Washington Wealth Advisors is here to help you prepare for whatever comes your way. From evaluating insurance coverage to saving for college, we want you to achieve every financial goal you have set for your new family. To get started, call our office at 703.584.2700, book an appointment online or email firstname.lastname@example.org.
Important WASHINGTON WEALTH ADVISORS DISCLOSURES Information
Washington Wealth Advisors is a fee-only registered investment advisory firm serving busy families, executives, women building wealth, and small business owners. We provide Wealth Advisory Services—financial planning coupled with asset management—guided by a personalized investment strategy based on each client’s unique goals. Our unbiased advice, independent approach, and proactive investment management help to support our clients’ overall financial peace of mind.