Financial Planning Issues for New Parent
With my wife and I expecting our first child later this month, I’ve been thinking about how this will impact our family’s financial plan and what items we will need to address in the near future to ensure that our family is financially secure. Since this checklist may be helpful for other new parents I’ve decided to share it.
New Child Financial Checklist:
Revise Budget: Family living expenses will need to be revised upward to account for the new member of the family, which will lead to increased cost of groceries, clothing, medical expenses, and child-care.
Create or revise a Will: An important aspect to a will is that it allows parents the opportunity to elect a guardian of their child in event of the parents passing away.
Update Beneficiaries: Review all accounts to ensure that beneficiary designation is exactly as it is intended to be. Parents may wish to have each other listed as their primary beneficiaries and update the contingent beneficiaries for assets to pass to their young children in trust in the event that both parents pass away.
Review Insurance: Both life insurance and disability insurance should be reviewed to ensure that the family is properly protected.
Review Employer Health Care Benefits and Consider FSA accounts for dependent care: In addition to ensuring that the family has the proper health care insurance in place, parents should check to see if their employers offer a Flexible Savings Account (FSA), which may allow them to contribute pre tax dollars to pay for dependent care expenses including day care.
Income Tax Considerations: In addition to claiming an exemption for dependents, if parents have qualifying child-care expenses they may be able to take advantage of both a FSA and the Child and Dependent Care Credit; however they cannot claim the same expenses for both. Some planning will need to be conducted to determine which option is most suitable for the family.
College Savings: The cost of college education can be daunting. Starting to save early and utilizing tax advantaged 529 college savings plans, parents can put themselves on the right path to help pay for their child’s education. To learn more about 529 College Savings plans click here.
The birth of a child is a significant life event and touches on many different aspects of a family’s financial plan. If you have any questions please feel free to contact us at (610) 977-2409 or bsmith@wealthcaesolutions.com.
