If you and your spouse are having a child together, there can be a dizzying number of things to think about. Many of these concerns tend to center around money, which is why financial planning for new parents is so important.
Financial planning with a newborn can be a seemingly Herculean task. You may not even know where to begin or what decisions to prioritize because of how chaotic things can be.
This article should help shed some light on how to plan for you and your family’s financial future.
Invest in life insurance
If you and your spouse don’t already have life insurance, you should strongly consider purchasing a policy. Doing so can offer a safety net should anything tragic happen to either of you. You can look into purchasing a life insurance policy for the spouse who earns more (to make up for potential lost wages) or for the stay-at-home-parent (if there is one) to cover potential childcare costs.
Create or update your will
Thinking about things like life insurance policies and estate planning can be uncomfortable for some, but having a plan in place to ensure that your wishes are met beats having your assets distributed in a manner you would have otherwise objected to. Talk with your spouse about creating a will if you don’t have one or about updating the one you do have with the help of an estate planning attorney.
Craft and monitor a household budget
When it comes to financial planning for new parents, creating a budget and keeping an eye on it will help immensely. Knowing what you plan to spend on which items ahead of time and setting money aside for those purposes can ease the stress of financially supporting a newborn child. You and your spouse can collaborate on this as you decide which items are necessities and which are luxuries and how much you’ll be able to save each month.
Have an emergency fund
There are several potential pitfalls when financial planning with a newborn, and not having an emergency fund is one of them. The nice thing about creating an emergency fund is that having a household budget makes it that much easier. This emergency fund should ideally contain enough money to support a spouse who is unemployed for six months to a year. With the current state of the economy, job security is as tenuous as it’s ever been, and having an emergency fund can make job loss much less stressful.
Start saving for college and retirement
If you haven’t already, you should start saving for both your own retirement and your child’s future college education. When prioritizing which to save for first, opt for your retirement, because there are financial aid options available for college. Additionally, if you need to, in some situations, you can withdraw money from a retirement account tax-free if you use it to pay for qualified education expenses.
Call for financial planning advice today
Now that you know some tips for financial planning for parents with a newborn, call us at the Fiduciary Advisors, LTD. We offer defined benefit plans, defined contribution plans and owner-only plans, all geared toward ensuring that you and your family’s financial future is secure.