1. Update Your Budget & Understand Your Cash Flows
As your family starts to grow, so too does your expenses. Ensuring you have budgeted for new/upcoming expenses can go a long way. Include their expenses in your budget – from diapers and formula to childcare and out-of-pocket medical costs. Make sure to track the spending and update your budget accordingly.
2. Child Care Costs
Have a conversation with your partner to understand what your goals are regarding childcare. Make sure to factor in that expense to help make the decision of staying at home, exploring daycare centers or in-home care.
3. Build Up An Emergency Fund/Cash Reserve
Once you have a better understanding of your new budget, make sure to prepare for emergencies. Consider keeping 3-6 months of living expenses accessible in a savings account. A safety net for unexpected expenses such as medical bills or a sudden change in employment, will ensure your family is in a better position to whether a financial storm.
4. Review Employee Benefits
Work with a FA to understand and assess your workplace benefits, such as health insurance, flexible spending accounts (FSA), and dependent care assistance programs. Most employers offer great benefits to attract and retain their employees, make sure you maximize these benefits available to you.
5. Health Insurance
Review your current health insurance coverage to ensure it includes maternity and pediatric care. Have a clear understanding of your policy limits, co-pays, and deductibles.
6. Estate Planning
Ensure all your documents are created or up to date. Consult with an attorney if you don’t have these documents: Revocable Trust, Wills, Guardianship documents, Power of Attorney, HIPAA Authorization. These documents identify who will handle your affairs if you’re incapacitated, determine how your assets will be distributed, designate health care agents, and avoid a probate process.
7. Life Insurance
Consider obtaining life insurance policies for both parents to protect your child’s financial well-being in the case of an unforeseen tragedy. Evaluate life insurance options based on your specific circumstances and financial goals.
8. Tax Planning
Understand the tax implications of adding a child to your household. There are tax credits, tax deductions, and tax exemptions related to childcare, education, and dependent status to ensure you optimize your tax situation.
9. College Savings
Consider saving for your child’s education as early as possible through tax-advantaged vehicles like a 529 plan. Recent updates via SECURE ACT 2.0 have added flexibility to a 529 plan – starting in 2024, any money left over in the 529 account may be transferred into that child’s Roth IRA, free of a tax, penalty, or applicable income limits.
10. Comprehensive Financial Plan
Working with a financial planner to define your long-term financial goals as a family. A financial planner can help you prioritize 529 college savings, repayment of your student loans, homeownership goals, retirement plans, and other aspirations. Regularly review and adjust your plan as your life continues to evolve.
Author: Henry Silva, Planning Coordinator | Wealth Management Advisor
10 Things to Consider When Building a Family Financial Plan