Thinking about starting a family? You are headed toward possibly the most meaningful milestone in your life!
While it brings a lot of joy; there are some serious financial changes to think about too! When you are expecting your first child or planning for one, your financial priorities will of course change. All the more reasons you should prepare and get your finances in order before the baby arrives! It will reduce stress and help you feel more confident about the future!
Here are five essential financial steps you can take before growing your family.
- Evaluating Your Health Insurance and Costs
Before starting your family, check your health insurance coverage! Look at what is included and what is not. This way, you can avoid any surprise bills in the future. Also, check your plan for maternity care, prenatal visits, labor and delivery etc. Even when services seem like they are covered, it does not mean they are free! You may still need to meet deductibles or copay.
Also check if your current plan allows for adding a dependent mid-year. Otherwise, you will have to wait for open enrollment. If you are uninsured, consider exploring CHIP or Medicaid- which may offer coverage for pregnant individuals.
- Building a Family-Centered Budget
Adding a new family member is a huge change- particularly in your budget! It is not just the onesies or diapers or formula- but also other expenses like doctor visits, childcare, and items like cribs or strollers. You may also have to adjust for housing and transportation. This may extend to even your career plans so that you can meet the needs of your growing family.
This may also be a good time to review your household budget. If you do not have a budget, start now! Factor in recurrent baby expenses and one-time purchases too. Also include non-obvious items like increased household supplies, utility bills, and education costs in the future. In this regard, talking to a professional, like a financial planner in Surprise, AZ can be helpful. They can help you model various scenarios and prepare for each possibility with more clarity.
- Planning for Parental Leave
One cost that many individuals overlook when starting a family is the income gap when you take time off. The United States does not guarantee paid parental leave at the federal level. While some employers do offer generous leave policies, others offer only unpaid time through FMLA (Family and Medical Leave) if you are eligible. It is important to know where you stand.
Talk to your HR to learn what benefits are available to you and your partner. Ask if you can use sick days or vacation time. You should also find out if short-term disability coverage would apply to maternity or paternity leave.
Use this information to determine how much income you may lose during the leave period- and start saving now to fill that gap!
- Setting Up Legal and Insurance Protection
When you start a family, your financial responsibilities are no longer only limited to the monthly budget! This is also the time when you create or update your legal documents, like a will or power of attorney. Name a legal guardian for your child, in case something happens to you. These steps are not easy to think about! However, they are important for your child’s future security.
You may also want to review your life and disability coverage. See if they cover enough to support your family if you are unable to work or in the event of your death. If not, consider increasing your coverage. If your job provides group insurance, check the policy terms and consider getting an individual policy to supplement it. This will ensure the protection of the people you love the most.
- Saving for the Future
It is better to start saving for the future at the earliest! One of the most important aspects to focus on is education. Consider opening a 529 college savings plan where you can start putting money away now that can grow tax-free, provided it is used for qualified educational costs. Even small but regular contributions will add up considerably over time.
Also, set up an emergency fund that can cater to any unexpected event. Babies can bring unforeseen costs and having a financial cushion for such times helps.
Endnote
Financial preparation before starting a family takes time and careful thinking! However, the reward is definitely worth it!
With a solid plan in place, you can easily focus on enjoying those precious moments with your family. So start today! Every step you take now, lays the groundwork for a secure and confident future! Your planning today will give you peace of mind tomorrow!