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Financial Checklist for New Parents

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Baby with an iPodMy wife and I recently had our first child, and to say it has changed our life is an understatement. Raising a child is an amazing responsibility, and it doesn’t stop with feeding and caring for him or her. Somewhere between the late night feedings, diaper changes, and doctors appointments, you will need to take care of an assortment of extra activities to make sure you have our finances in order. There are many things you will need to do when your child arrives and you will have many distractions, so I recommend creating a checklist so you don’t miss anything.

Before Child (B.C.)

Raising a child will have a dramatic impact on your finances. Your expenses will climb at a time when your income may drop. Your added expenses may include food, diapers, clothing, doctors visits, medicine, child care, toys, and more. This change will catch you off guard if you aren’t ready for it, so the best time to prepare for this life changing event is well before you plan on having children.

Because your expenses will climb, I recommend creating a budget and finding a way to reduce your monthly expenses. That will help give you a buffer zone to allow for the irregular expenses you will experience when your child arrives. In addition, you should create an emergency fund to help handle any unexpected expenses that may arise. For more information about starting a strong financial plan, check out Dave Ramsey’s Baby Steps.

My wife and I started planning for our child about two years ago. We paid off all our debt and started living on one salary in preparation for my wife to become a stay at home mom. You may not need to plan two years in advance, but I recommend staring on your path to financial security as soon as you learn you are expecting – if not sooner.

After Child (A.D.)

This is when the fun begins, and I’m not referring to diaper changes! You will probably be in a daze for the first few weeks as you and your baby try to settle on a schedule, but there are many important things to take care of:

  • Add your child to health insurance (you usually have 30 days to add your child to your employer sponsored health insurance for a life changing event).
  • Apply for child’s Social Security Number (some hospitals complete the paperwork for you).
  • Reevaluate your life insurance and update your beneficiaries.
  • Update your estate plan: create a will if you have not already done so, and be sure to specify a guardian for your children.
  • Update your budget: Be flexible the first few months – you will have a lot of new expenses to track.

Start your child on the right path

Your child will be too young to understand what it means to save money, but that doesn’t mean you can’t start for him or her. You can open a savings account and start saving the monetary gifts your child receives for his or her birthday, holidays, etc.

Consider opening a 529 Savings Plan or Coverdell ESA for your child’s college expenses. These college savings plans offer tax advantages when the money is withdrawn for qualified educational expenses, no small matter when it comes time for the little critter to go off to college.

Raising a child is a lot of work, but it is also one of the most rewarding experiences you can have. Hopefully these tips can help relieve you stress so you can spend your time on more important issues – like caring for your child!

This is a guest article written by Patrick, who writes about personal finance, small business, and career topics at Cash Money Life.

(Photo: tedsblog)

{ 13 comments, please add your thoughts now! }

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13 Responses to “Financial Checklist for New Parents”

  1. Patrick says:

    Thanks for the opportunity to write a guest post, Jim! Hope you are enjoying your vacation. 🙂

  2. Monkey Monk says:

    I’d recommend the book “Expecting Money: The Essential Financial Plan for New and Growing Families” by Erica Sandberg. We used this book before having our first child and found a lot of the tips and worksheets to be extremely helpful.

  3. PT Money says:

    Nice reminders here, Patrick. There’s still a few things here I’ve yet to check off. But they’re in the works. Where would you recommend getting a Will done?

    • Patrick says:

      You can get a will kit to cover a basic situation, but if you have anything fairly complicated then I would see a lawyer (you may prefer to visit a lawyer anyway). A standard will prepared by a lawyer shouldn’t cost too much and you will have the piece of mind that it was done correctly.

  4. Keith Morris says:

    Great post, Patrick! Very helpful. I have quite a few of these to check off myself, not the least of which is actually *having* a kid. 😉 Someday, I hope!

    I just recently helped to organize a live talkcast event during which we discussed how to talk to your kids about money. If you’re interested in further thoughts on the steps to take after these “baby steps,” give it a listen here:

  5. FFB says:

    Great advice! I like that you mention to keep a budget flexible in the beginning. Lots of little expenses creep up once the baby is born.

    I’d also add that you should take advantage of flexible spending plans at work. Just like life insurance you should have 30 days to update the amounts you contribute. If you plan to send the baby to day care within the year you can consider contributing to a daycare plan as well. The expenses you put into the plans get reimbursed tax free.

  6. a.b. says:

    Great article. Like the general principles, but there’s a couple things I’d add:
    1) B.C. Have a sit down with your spouse on what you are or are not willing to do to save money. Some people are gung-ho for cloth diapers, etc., but it only works when both parties are on board.

    2) Discuss the financial education you want to give your child. Do you both believe in allowances, or chores for pay? Setting up a basic plan early on (B.C. or A.D.) with flexibility to take in the individual child’s needs can mitigate a lot of contention later.

  7. tperko says:

    Great post! These are essentials, maybe not in the form of a crib or other material goods, but far more important in the long run!

    Make best use of your local resources! Just mentioning that a baby was on the way opened up a lot of doors for us.

    The baby budget will fluctuate depending on age also, which constantly changes. Just remember – anything with batteries, in the long run, will drain your bank account.

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