Being a new parent can be an incredible, stressful, and incredibly stressful time all at once. So much to learn and do, from pediatrician appointments to perfecting your swaddling technique. But there are a few critical items that you can be doing now that have the potential to make a huge impact in your family’s future.
As a new parent, I’ve found that using to-do lists has been helpful for my sleep deprived, distracted brain. As a Certified Financial Planner, I know what items are especially important for clients with young kids. The list below is geared towards helping out parents that have just welcomed a newborn, whether it’s their first or their fifth. These things don’t make for great conversation at a party and certainly aren’t as Instagrammable as a cute photo of your little one. But perhaps that is the point. There are no constant reminders by your friends to get these things done. No social pressures, and often times no immediate reward. What they will bring you is peace of mind, more financial freedom, and a bright future for that new baby of yours.
1. Update Your Beneficiaries
Hopefully, you already have a primary beneficiary on your financial accounts (if not, let’s get that done too). For most, the primary beneficiary is their spouse. But what happens if you and your primary beneficiary both get hit by a meteor? That’s where your contingent beneficiary comes into play. If this is your first-born, you’ll likely want them as the contingent beneficiary. If this isn’t your first born, this is even more crucial. You don’t want to spark an argument because Johnny gets your Roth IRA and Sally gets nothing.
Making the changes is easy and can usually be done online in a couple of minutes. Remembering all of your accounts can be the tough part. Here’s a few suggestions to spark your memory:
- Employer Retirement Accounts – (401k, 403b, etc.)
- Individual Retirement Accounts (IRA, Roth IRA)
- Brokerage Accounts
- HSA Plan
2. Create/Update Estate Planning Documents
“Estate Plan” is a general term and can encompass wildly different things for different people, depending on what state you live in, your assets, and your personal preferences. However, there are 5 documents to make sure you have at a minimum. Estate plans can vary as widely as cars, but these are the tires and steering wheel:
- A Will
- Durable Power of Attorney – Healthcare
- Durable Power of Attorney – Finances
- Health-Care Directive
- Burial Instructions
If you already have them, you should update them to include your new screaming bundle of joy. Don’t have them? Not to worry, there probably wasn’t a real need… until now!
Lost? Read here or contact an estate planning attorney. For a cost effective solution, consider utilizing a software like Quicken Willmaker 2020. This is essentially the TurboTax for estate documents.
3. Open A College Savings Account
Alas, something that doesn’t involve you dying! There are a ton of ways to save for college, but a couple of them have distinct tax and investment advantages; a 529 plan being one of them. They are easy to set-up, experience tax-free investment growth, and if your little one is lucky enough to have multiple people in their life that would like to contribute, it makes that easy as well. You can also transfer money between your kids, so if the oldest lands a scholarship or ends up not needing the funds, you can always use them for a sibling. Here’s a great article that answers more common questions about 529 plans. So how do you set one of these up? my529.org is a great place to start, unless you live in a state with state income tax benefits. You’ll also have the ability to select what type of investments you would like in the account. One common choice is to select a fund that is more aggressive early-on and tapers to become more conservative the closer the beneficiary (your kid) gets to being 18.
4. Update Your Health Insurance
If you and your spouse both work, chances are one of you has a more favorable health care plan to add the new kid onto. Factors to consider are monthly premium deducted from your paycheck, deductible, and out of pocket maximum. Talk with your Human Resources department to get a summary of the changes that would occur should you add the little one to your plan.
5. Budget for Near Term Expenses
Daycare? A new vehicle? More coffee? It’s likely you have some new expenses you had planned for, and others that maybe were a bit more unexpected. It’s a good time to revisit your monthly budget now that life has changed a bit.
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