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Planning for baby - financially speaking

Having your first child or adding to your family is a very exciting and rewarding experience.  Before the baby arrives there seems to be a lot to do, fix up the nursery, attend baby showers and yes, start planning financially for that new bundle of joy. New children often require a re-working of the monthly expenditures, whether you are on a budget or not.
 
Financial speaking, where should expecting parents start with a baby on the way?
The first place is reworking their budget to pay for everyday expenses with the new baby.  New parents are sometimes surprised that their food and household expenses increase pretty quickly with a new born.  They just don’t realize how many diapers and wipes a new baby use in a week. Visiting the baby aisle and to start getting a handle on what things cost is very educational experience for new parents.
 
What is one of the biggest decisions for new parents or even parents adding to their family?
If both parents are working, the biggest decision facing them is deciding if one of the parents will stay home full time.  There are so many factors to consider, especially with the cost of daycare. The best way to determine if it is feasible to have one parent stay home is to start living on one income before the baby arrives.  If it is important for one of the parents to stay home, having a trial run gives couples plenty of time to make adjustments to their budget.
 
It is also important for expecting parents to not make any major purchases without considering the long term impact on their financial situation.  This is especially relevant if you are thinking any major purchases like a new car or home during this time period.  Make sure you can afford the payments on one income if that is an option you want to have available to you.
 
What are few things expecting parents should do right now?
If you have a high deductible health insurance plan that includes a Health Savings account, increase your contribution to include child related health expenses.  A new baby will require several doctor visits and having pre-tax money to use is a smart financial move.  Also, look into opening a flexible spending account for daycare expenses if that will be needed.  If the mother expects to return to work but wants to take the maximum time off, start saving now for that period of time when you will only have one income.  You don’t want that extra time off to create a financial hardship.
 
What would be a couple of long range planning tips?
The big one, start a 529 plan as soon as the baby arrives. Starting early with your college savings is just a smart financial decision that will pay dividends in the future.  And the second planning tip is to make sure that you have your family protected.  This starts with updated wills; updated beneficiaries on things like 401k plans, insurance; and, making sure your life insurance coverage reflects your new family situation.
 
Having a new baby is an extremely emotional time and can be stressful. Starting early with financial planning can help alleviate some of the stress.  Financial worries should be the last concern you have when your new baby arrives.


Posted: 2/24/2014 with 0 comments

Categories: Kids and Money, Money Matters, Planning



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