Preparing for baby? Three tips to get your finances in order.
Getting ready for a baby is an exciting and terrifying time. Putting together a crib and changing table prove to be bonding experiences of epic proportions for parents. This is true both with the emotional it’s-really-happening as well as the typical putting-together-furniture-is-so-frustrating issues.
Amid these bonding experiences, you may find yourself having panic attacks about other issues of parenting. One big issue: the cost of raising a child. Recent data from the United States Department of Agriculture states that raising an average kid in a middle class home will cost approximately $245,000. This number accounts for clothing, food, child care and health care needs. It does not include estimates for a college education.
This means that little bundle of joy will likely cost you almost a quarter of a million dollars. This may make you pull up your bank account and worry. Take heart, a few simple tips can help to better ensure you are financially prepared for the adventure that is parenthood.
Tip #1: Get insurance.
Insurance provides a safety net. Two policies to consider and review are health insurance and life insurance.
Health insurance can help reduce the costs associated with health care. Even the birth of the child can run into the thousands. Review your plan to make sure you are planning to use a facility that is covered. Make sure the pediatrician you plan to use is covered. If not, consider adjusting either your policy or your plans.
Life insurance is also helpful. If you already have it, now is a good time to update beneficiary designations. If you do not have a policy, now is a great time to get one. The policy can provide funds to help your family if something tragic were to happen.
Tip #2: Review your taxes.
Adding anything involving the Internal Revenue Service (IRS) to your to-do list is always fun. Regardless of how ominous a task this may seem, taking a moment to review your taxes, especially allowances, before or shortly after the birth of a child is a good idea.
Why? For some families, it may make sense to increase allowances.
Tip #3: Get an estate plan.
An estate plan is a handy legal tool. It does more than just determine what goes where, it also provides plans for financial and healthcare management in the event that you are unable to communicate your wishes. This would come in handy if involved in a car accident that leaves you unconscious.
Families with children should also include guardian documents. These documents give you the opportunity to designate who should be responsible for the children.
It can also be wise to put together a few trusts. Trusts are legal instruments that provide guidance over how funds should be used.