Becoming New Parents
Parenthood brings all sorts of new joys, experiences, and responsibilities—including financial ones. And once your new child arrives, you’ll be busy with a myriad of new tasks and duties, so get started on the checklist below as early as possible to be financially prepared for your child’s future.
Checklist – New Parents
- Review your employer’s maternity or paternity leave policies, if available, to understand eligibility for paid time off.
- Determine if both parents will work full-time, or if one will work part-time or stay at home and care for the child. Research daycare expenses and get on a waitlist early for your chosen provider, if necessary.
Tip: If one parent is considering staying at home, practice living on a single income. Keep in mind that staying at home impacts more than the loss of income—career advancement, future salary increases, retirement savings, and Social Security can also be impacted.
- If both parents are working, find out if a dependent care Flexible Spending Account (FSA) is available through your employer. This can help maximize the value of your income by paying for childcare expenses with pre-tax money.
- Add your child to your health insurance plan. This is a qualifying event and is typically required within 30 days of the birth or adoption. Be sure to reevaluate the health insurance for both parents to ensure the current plan is still best for the family.
- Ask the hospital where your child will be born if they assist with the process of obtaining a birth certificate and Social Security card for your child.
- Consult a qualified tax advisor to determine if you are eligible for tax incentives such as the child tax credit, medical and dependent care Flexible Spending Accounts or adoption credit(s).
- Increase your emergency fund before your child’s arrival. Be sure to account for the additional expenses of your larger family, like health insurance deductibles, food, clothing and household items.
- Evaluate your current life insurance and disability insurance coverage and determine if your family is adequately covered if the unexpected happens.
Tip: Many people believe one or two times their annual salary is enough to protect their family and allow them to continue the same standard of living. However, it can require 10-20x your annual income in life insurance to provide your family with financial security and choices.
- Hire a qualified estate planning attorney to establish or update your essential documents, such as Wills, Financial Power of Attorney and Advance Medical Directives. Your attorney will be able to provide guidance on whether or not your situation may require more advanced planning techniques, such as a formal Trust.
- Take time to reflect on who you will appoint to be your children's guardian (the person who raises your children and is legally responsible for them) and trustee (the person who manages any money your children will inherit) if both parents pass away.
Tip: The guardian and trustee do not have to be the same person. The guardian may be someone who is very caring and nurturing, can contribute to the school bake sale and help with homework, but may not be good with managing money. The trustee can make sure the children’s financial interests are protected. The trustee could be a loved one or a trust company.
- Research your school district and consider your growing family’s home needs in terms of physical space and geographic location. If you find you need more space or are unhappy with the school district, learn more about buying a home.
- Establish a Youth Savings Account and contribute to it regularly with gifts from special occasions like birthdays or holidays.
- Research and learn about preparing your child, and your family, for college. Consider starting to invest for future expenses of higher education in a dedicated account such as a 529 or Coverdell Education Savings Account.
- Teach financial lessons to your children, such as understanding the important difference between needs versus wants. Utilize free educational resources for children, such as Delta Community’s Cool Cash Money Camps.
Having children is a life-changing experience, and parents want to do all they can to help their children grow, learn and be prepared for life as adults. The financial responsibilities of raising kids are significant, and it’s equally important for would-be or current parents to prepare themselves for meeting the support needs of their family.