Raising children is a massive expense for most young adults. Current estimates of the cost of raising a child to the age of 18 is roughly $270,000. Luckily, new parents don’t have to shell out that sum of money at the start of their parenting journey.
Make Sure Your Insurance Is in Order
The health insurance policies of insured mothers will usually cover newborns for two weeks to a month, but you will need to add your baby to your health insurance policy as soon as possible. The birth of a child counts as a special circumstance in which you change your health insurance outside of the normal open enrollment period.
You’ll likely be required to have the baby’s birth certificate and their social security number to complete enrollment. Avoid any lapses in coverage by finding out ahead of time what the grace period is on your coverage and how long the special enrollment period lasts.
This is also a good time to review or modify your life insurance policies. Single people or couples without children, especially when they’re still relatively young, likely don’t dwell on life insurance. It’s not a fun topic of conversation.
It’s important to consider these things before delivery. While birth injuries and deaths are rare thanks to advances in modern medicine, they can and do still happen. Life insurance can help you find peace of mind that if the unforeseen happens, your surviving family members and your new baby will be protected.
Start a 529 College Savings Plan
You can open a 529 plan as soon as your child (or your grandchild) has been assigned a Social Security Number. The importance of college varies from family to family, but if it’s something you want for your child in their young adulthood, there’s no reason not to start early.
Not all 529 plans are made equal, so be sure to shop different state 529 plans and consider your options. Also keep in mind that contributions to a 529 plan are deductible in Arizona, which could be an additional incentive to start saving for your baby’s (or grandchild’s) future education.
Arizona is one of only a handful of states where you can deduct contributions to any state’s 529 plan. In most states, you must enroll in your own state’s plan to claim deductions.
Although 529 fees are not the only differentiating characteristic to consider when browsing plan options, it’s worth remembering the plan fees are annual. You will likely need to pay them for a minimum of 18 years.
Know Your Budget
This, along with enrolling your new baby in your health insurance ASAP, is maybe the most important thing you can do ahead of your child’s birth. It’s also relatively easy to accomplish if you’re thorough.
Start calculating your projected expenses for things like diapers, baby food, formula, baby clothes, toys, baby proofing tools, accessories, etc. There are many new expenses you’ll have within the first couple years of a child’s life (babies are notorious for growing extraordinarily fast and will need things like new clothes often.)
With a little bit of research on baseline baby consumption and expenses you can likely get a general idea of what you’ll need to spend each month.
Also discuss childcare with your spouse or partner. Many young professional couples will need to pay for childcare, and it is likely going to be your biggest new expense in the years before your child can begin kindergarten. Know what you can afford and begin adjusting your spending habits accordingly, so you’re not blindsided by the cost.
Is Your Estate Plan in Order?
Like life insurance, estate planning is another unpleasant conversation, especially when you’re primarily focused on bringing a new life into the world. It’s still important to be prepared for the unexpected. You may want to consider scheduling a consultation with an estate planning attorney or researching boilerplate will options. If you have the assets and income to justify a trust, you may want to look into starting one.
Do You Have an Emergency Fund?
An emergency fund is an important thing for any young person or family to have, but it gets even more vital as you begin growing your family. If you haven’t set up a system for setting aside a little bit of your income each month for unpredictable financial hardship, now might be the best time to start.
Talk to an Investment and Retirement Advisor in Phoenix
At this point in a new family’s life there are a lot of different things they need to be saving for, from college savings plans and retirement plans to rainy day funds. Speaking with an investment expert or financial advisor can help you get a better grasp on your finances and ensure your assets are on a reliable path to sustained growth.
You can schedule a consultation with a Fullerton Financial advisor today by calling (623) 974-0300.
