When you’re getting ready to have a baby, things like a new car seat, cute baby outfits and the perfect paint job for the nursery are clearly important — and fun to pick out. But there are other equally important tasks that may not be as top of mind — or the kind of thing that will wind up on a baby shower list.
Still, in between picking out paint colors and folding new baby clothes, it’s a good idea to have a new baby financial checklist so that when your baby arrives, you have one less thing that keeps you up at night.
REVISIT YOUR BUDGET
Why it’s important: A new baby comes with expenses that you likely haven’t had to factor in before. You’re going to want to revisit your existing budget or, if you don’t have one, create one from scratch. You’ll need to plan for recurring costs like diapers and child care. That can make it easier to stick to the necessities while also leaving room for fun expenses, like that mom-and-baby yoga class you’ve had your eye on.
What to consider: If you’re part of a two-income household and you or your partner plans to cut back on work hours, your revamped budget will need to account for the decrease in take-home pay. To ensure your new budget is feasible, consider doing a test run of your reduced income before your baby arrives and put the second income into an emergency fund to give your savings a boost.
WRITE A WILL
Why it’s important: A will may sound like something your parents should have to determine who gets grandma’s antique silver set. But it also serves a critical role when you have a baby. If, god forbid, something happens to both parents, a will allows you to designate you will get custody of your child and how any money you pass to them is managed. Without one, a court will make all those decisions. If you already have a will, you should update it.
What to consider: As a new parent, your main concern will be determining a guardian to take care of your child should the unimaginable happen. You can also name the beneficiaries of your estate and write in conditions to ensure your finances are used the way you intend.
CONSIDER A 529 ACCOUNT
Why it’s important: A tax-advantaged plan like a 529 (which gets its name from Section 529 of the Internal Revenue Code) education savings plan can be a smart way to save for college. It is unique because it can be used to cover college costs, as well as any qualified education expense, including K-12 school costs. An education savings plan grows tax-deferred and has a $2,000 yearly contribution limit that is subject to certain restrictions.
What to consider: Higher education is costly, so the earlier you start saving, the longer the funds will have time to grow. And while it’s impossible to predict where, or even if, your new bundle of joy will attend college, a 529 account is still worth creating because of its flexibility. For example, if your child’s path doesn’t end up including college, you can make another person the beneficiary of the funds, including yourself.
GET LIFE INSURANCE
Why it’s important: Your baby will be looking to you for support throughout his or her lifetime. That will include a lot of financial support: a house, clothes, food, college…these things all cost money. If you were to pass away, life insurance will ensure that your family will have the financial support that it needs.
What to consider: While there are different types of life insurance, the two most basic types are permanent and term. In a nutshell, permanent life insurance never expires and accumulates a cash value over the course of your lifetime, while term insurance covers you for a finite period of time. Because the two types tend to serve different roles in a financial plan, many new parents get a mix that includes a small permanent policy and a larger amount of term insurance. If you aren’t sure how much life insurance you’ll need, this calculator is a good place to start. A financial advisor can also help you determine the best option for you and your family.
REVISIT YOUR HEALTH INSURANCE
Why it’s important: Any expectant parent knows the importance of health insurance for both prenatal care and hospital delivery costs. And once your baby arrives, he or she will need coverage for initial pediatrician visits and any other health concerns that may arise.
What to consider: Before your baby arrives, you’ll want to review your plan to determine if it’s still the best option for your growing family. When comparing plans, consider health care providers who are in-network and confirm deductibles, co-pays and out-of-pocket maximums to keep costs down.
Normally you’re only able to make changes to your health insurance plan and coverage during open enrollment. But because having a baby counts as a qualifying life event, you can make changes outside of the enrollment period when your baby is born. You typically have 30 to 60 days to name your baby on your policy after he or she is born, so check with your insurance provider to ensure you don’t miss the deadline.
APPLY FOR A SOCIAL SECURITY NUMBER
Why it’s important: While it’s voluntary to get your newborn a Social Security number, they’ll need one for you to begin their financial life, including claiming them as a dependent on your tax returns — which can reduce your taxes.
What to consider: You can apply for a Social Security number for your baby as soon as they’re born — in fact, you’ll likely be asked if you want one at the hospital when you provide information for your baby’s birth certificate. If you don’t receive the requisite paperwork then, you can also visit your local Social Security office to apply for one.