6 Handy Financial Planning Tips For New Parents

Becoming a parent is a joyous experience but it is a huge responsibility as well. Right from the day the child becomes a part of your life, your expenses go up and increase with time. From diapers to healthcare, daycare, insurance and schooling, there are a lot of things that you will need to spend on. Further, there are long-term aspects like the child’s care, education and career planning that get you thinking about future plans. ...

Despite the fact that parenting sounds like a complicated experience financially, you can still plan as a new parent and be stress-free about the child’s future. The idea is to have a financial plan ready even before the little one arrives so that you can enjoy this amazing journey. Here are some useful financial planning tips that all new parents need to follow.

Add the child to the health insurance plan
The first thing to do would be to get your baby added to your health insurance plan. Get in touch with the provider and inform about the baby. Ideally, you are allowed an enrollment period during which you can make changes in the health policy or even enroll a new one with the baby included. Typically, most plans require the child to be added into the plan with a period of 30-60 days after the birth. Getting this done has the child covered retroactively, which means that anything between the birth and enrollment will be covered as well.

Buy a term insurance
The next feasible step for new parents should be to buy a term life insurance. This is all the more important if your spouse and child are financially dependent on you. The purpose of life insurance is to protect you and the dependent family members financially against worst-case scenarios. You just have to pay a monthly premium which will not cost a fortune for young, healthy adults and the family will be protected against unfortunate events. This seems like a small price to pay considering the protection and freedom from stress it offers.

Create a will and name your beneficiaries
Having a child is a life-changing event as it teaches you how to think differently about wealth, with the child’s future in view. You need to understand the significance of having arrangements for the children in case of your untimely death. Drawing a will with the beneficiaries’ names on your account is the best approach in this context. It would be feasible to name a guardian of the estate who will manage your assets till the children reach legal age. A will is flexible and you can change it to have more names added in case your family grows subsequently.

Update tax forms to claim child tax breaks
Typically, you get tax breaks for every child born into the family. Further, there are also some other benefits that you get when you have dependent children. As a new parent, you will need to update your tax forms to avail these amazing benefits. This is a significant opportunity that you should not lose at any cost and get the needful done right after the child is born.

Start saving for the child’s education
Since college education is a major expense, it is something that you should start saving for right after the child is born. This might seem too early but considering the importance of the matter, the sooner you start saving the better it is. You can explore that option of a tax-advantaged savings plan for this purpose because it enables you to invest and save while saving on taxes as well. Research is the key because there are several options in such plans.

Create an emergency fund
With a baby or two in your family, unforeseen events like losing your job or an illness in the family may hit like a crisis. It is advisable to have an emergency fund to cover at least a few months of living expenses in case such an event arises out of the blue. This fund is like a cushion for new parents and needs to be created on the basis of the regular living expenses of the family. It is particularly important if the family is dependent on a single member’s income. A little far-sightedness and lot of financial planning makes you a smarter new parent. Learn to adjust your budget according to the increase in your expenses after the birth of the baby. Every penny saved will be an investment for the future of the child and the family as a whole.

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