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  • Marius

Ready to add a little one to your family? 6 things to consider.

baby in a fuzzy outfit

Adding a treasured new member to your family can be a lot of work. Here is a checklist to help you plan for the big day and beyond.

Determine the expenses.

Consider the immediate and longer-term costs to raise a child. Things like:

  • Healthcare for the birthing parent and child

    • Provider visits

    • Increased healthcare premium

  • Supplies and Materials

    • How do you plan to feed your babe?

      • Your health care insurance may cover some nursing supplies, like a breast pump, but not others, like nursing-friendly clothes

      • Will you want, or need, formula?

      • Bottles

      • Diapers or diaper service and related supplies

  • Loss of income due to parental leave

  • Postpartum assistance like a doula or nurse

  • Professional childcare such as daycare or a nanny

  • Services like grocery delivery and house cleaners

  • Education expenses from pre-K to post-grad

  • Increases to overall living expense: utilities, food, vacations, and so on.

Infrequent expenses are one of the top contributors to going over budget in any situation. These expenses tend to slide under the radar because they are either one-time or require replacement annually or longer.

  • Car seat

  • Stroller

  • Bedding

  • Baby furniture (crib, changing station, bassinet, high chair)

  • Clothing

  • Toys & books

  • Childproofing

  • Home remodel or relocation for more space

A bottom-up approach to planning for expenses may be necessary for first-time parents, but it is also most likely to leave out expenses. Consider padding your estimate to account for the unknowns. Track your spending as expenses start rolling in and update your budget frequently until you settle in.

Especially as a first-time parent, be wary of the intense marketing you will face from your favorite retail sites, social media, and the internet in general. Consider talking with peers who are parents about what you really need and what they found genuinely useful.

Know the benefits offered by your employer and state.

Employers can offer a wide range of benefits that kick in when adding a child. States can offer programs that extend your leave options or even partially cover lost income while on leave.

  • How much paid birthing and bonding leave do you get? There could be both medical and parental leaves available to you.

  • Does your state offer any paid family leave programs?

  • Does your employer or state offer extended leave beyond FMLA?

  • Do you get any childcare subsidies or benefits?

  • Do you get reimbursed for adoption expenses?

  • Does it make sense to contribute to a Dependent Care Flexible Spending Account for qualified childcare expenses?

Figure out the impact to your near-term budget.

With a sense of expenses and potential loss of income in hand start by looking at near-term cash flows then look at the longer-term picture to understand the impact of potentially reduced saving over time.

  • Do you need to find old expenses to cut to make new expenses fit your income?

  • Is your emergency fund still sufficient to cover new types of emergencies?

  • If you need funds for medical expenses and you have an HSA, don't forget about that as a potential source.

  • Need another $5,000? Consider if a "Qualified Birth Or Adoption Distribution" from certain retirement plans is right for you. This will increase your income tax liability, so be careful.

Update your insurance.

Healthcare, life, and disability insurance should be reviewed in light of your new child. If giving birth, you'll also be asked to name a pediatrician from day one.

  • If you are a two-parent household, who will add your child to their health insurance policy? Does the same healthcare plan make sense or do you need something with a higher or lower deductible?

    • You generally have 30 - 60 days to make this change.

  • Find a pediatrician in your plan's network.

  • Does it make sense increase your HSA contributions if you have one?

  • Is your life insurance and disability coverage enough to cover your child's expenses and education goals?

Prepare for tax day.

Knowing what will happen to your tax situation lets you get the deductions and credits you deserve.

Revisit your long-term financial and estate plans.

Reduced savings over time and new goals can impact your long-term financial plan. Understanding your plan early gives you plenty of time to adjust and achieve your goals.

  • Which of your financial goals still make sense? Are there any goals to add or drop?

    • More family vacations

    • A different automobile for your family - or one for your child, eventually

    • Would you plan to help pay for a wedding someday?

    • Would you want to help with a downpayment for your child's first home?

  • Which education expenses do you plan to fund? Will you use a prepaid program, 529 plan, or another approach?

  • How does the timeline for your goals change?

  • Consider setting up a UGMA, UTMA. or 529 account for cash gifts. Be aware of the impact of gifting cash directly to your child will have on eligibility for financial aid.

  • Start or review your estate plan

    • Create trusts and appoint trustees to take care of assets for children.

    • Appoint a guardian to take care of the child's non-financial issues.

    • Update beneficiaries on all accounts to match your estate plan.

Bringing a child into your family is a remarkable journey filled with love and challenges. By doing a little planing along the way, you can create a secure and nurturing environment for your growing family.

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