Becoming a parent is the most life-changing event that many will experience. You are suddenly not only responsible for yourself, but also another person who depends on you for everything. It’s estimated that total child-rearing expenses from birth to age 17 for a middle-income American family is now $233,610. Although the range of expenses across families is wide, the truth is that adding a little one to the family is quite expensive.
To help new parents prepare for and navigate these changes, online life insurance agency Haven Life created a checklist of financial to-dos for 2018. Whether you are expecting or are currently adjusting to your new life as a parent, consider this checklist as a starting point for adapting to your new financial reality. Making the necessary financial arrangements now will minimize stress down the road and allow you to spend the most time loving and caring for your newborn.
- Add your child to your health insurance plan
It’s not unreasonable to think that your health insurance provider might contact you, or better yet, automatically add your newborn to your health plan. After all, the provider should be aware that you had a baby. It doesn’t work that way.
- Adjust your HSA contributions
HSAs, or health savings accounts, are an often underappreciated pre-tax benefit that can be used to pay for a variety of current and future healthcare expenses for you and your family.
- Buy term life insurance
When many new parents learn they should buy life insurance, it’s common to question whether or not it’s really worth it. After all, we all plan to be around for many years. If you’re at a point in your life where a spouse, child, or other family member relies on you financially, then the answer is simple: it definitely is.
- Update your tax forms to claim child tax breaks
The new Tax Cuts and Jobs Act (TCJA) that was signed into law by President Trump will affect new parents in many ways. Most importantly, the new law gets rid of the dependent exemption but retains the concept of a dependent in order for parents to claim the Child Tax Credit (CTC) and other child-related tax benefits.
- Create a will and name beneficiaries on your accounts
In the event of your untimely death, it is critical to have arrangements in place for your children. A will provides a plan for the division of your assets and also designates a legal guardian for your kids.
- Create a household budget
With a new child comes new expenses. The USDA reports that American families will spend an additional $10,000-$34,000 annually raising a child. Online budgeting apps like Mint or Personal Capital can help make this exercise as painless as possible.
- Build an emergency fund
Unemployment is stressful, but especially so when your family is growing. That’s why it is helpful to have an emergency fund that will cover 6-12 months of living expenses in the event of a layoff or change in employment.
- Start saving for your child’s college tuition
According to The College Board, the average tuition and fees for private four-year institutions were $34,740 for the 2017-2018 school year. A common way to save and invest for kids’ education is through a 529 plan—a tax-advantaged savings plan that can be used for qualified educational expenses.
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