Face it, things have changed. A new baby means new responsibilities which includes setting up a financial plan for the child. Too many new parents are so focused on the present that they fail to setup a financial plan for their child’s future. Big Mistake! Here’s what you can do to start fixing this problem.
Start Saving
If you haven’t already started saving or allocating money for baby related expenses such as formula, wipes, diapers, day-care, health insurance (get it if you don’t have it) – pediatrician co-pays, clothes, & other miscellaneous expenses, you must start now before you go into massive credit card debt. The monthly budget you had prior to having a baby doesn’t matter; you can throw it in the trash can. You need to update your budget today by WRITING it out and include all of your baby’s current & FUTURE expenses.
College is a BIG EXPENSE
Speaking of future expenses…college is a big expense. Private colleges can cost as much as $160K+ now and will undoubtedly be much higher in 18 years. To give your child the opportunity to go to college, you should be saving money for it now. There are 529 college savings plans that you can open up now to start the process. To get yourself a bit more familiar with the college process, refer to overcoming tuition cost.
Update Your Employee Benefits
You may not realize it but your employee benefit plan will probably include coverage for your new child. Remember that day when you were electing benefits thinking to yourself, some of this doesn’t even apply to me, I don’t have a child? Well, guess what…now it does. So be sure to update your elections immediately.
Beneficiaries & Wills
Just as we recommended for Newlywed Finance, you will want to revisit the named beneficiaries of your insurance policies and retirement accounts. Also, don’t forget about updating your wills.
Is that it?
Nope, there are likely many more items for you to address. A good rule of thumb is that if you had to or expect to experience an event such as college, marriage, child, or retirement, your child will undoubtedly too, so plan for it!
