5 Important Money-Related Steps New Parents Should Consider
Today, on Redhead Mom, I’m sharing a partnered guest post about 5 important money-related steps new parents should consider.
Becoming a parent for the first time can be one of the most exhilarating, overwhelming periods of your life. Suddenly, you have a small and amazing human to look after. This can be delightful and exhausting in equal measures. As you’re struggling through sleep deprivation and adjusting to this new role, there are a few important steps related to legal matters and finance you should think about taking to help ensure your child’s security.
Getting Life Insurance
You might not have ever needed or thought about needing life insurance before now, particularly if you and your spouse have a roughly equal income. However, once you have a child, life insurance can offer important financial protection if anything happens to you. But purchasing life insurance can seem anything but straightforward. There are so many different kinds, with some policies acting as investments, while others may be for only a specified period and a number of other differences.
There’s a wide range of costs as well. You can review a guide to help you determine what kind of policy is right for you. This will answer such questions as is term life insurance worth it and similar concerns. The other thing you need to figure out when it comes to life insurance is how much cover you need. Look at your annual income and consider how many years your child would need support. Keep in mind that this might include help with college or other endeavors and come up with an amount that includes that.
Saving for College
In fact, for some parents, beginning to save for their child’s college education is another important early step. With tuition expenses rising, there’s really no such thing as starting too early. There are a few different ways you can do this. Many parents prefer a 529 plan, which offers tax advantages, but you could also save money in a traditional or Roth IRA. Another tax-advantaged option is a Coverdell Education Savings Account. There are advantages and disadvantages to each approach, and it’s best to do your research and figure out which one will work best for you and your family in your current circumstances.
It’s not the happiest topic in the world, but estate planning should go along with looking into life insurance options. There are a few different elements to estate planning. If you already have a plan, you should review and revise it now that you’re a parent. One useful aspect of estate planning is that you can name a guardian for your child in a will, which can be relatively simple and inexpensive to prepare. You may also want to think about whether you need or want to set up a trust to protect property for your child until they come of age or are even older.
Consider Your Budget
Children aren’t cheap, but babies don’t need a lot. Don’t waste money on expensive clothes they’re going to outgrow or other items they won’t use for long. Do think ahead about things like childcare costs and how you might manage them. Your employer might have a flexible spending account that you can use for dependent care expenses that reduces your taxes.
Talk About Money
If you and your partner aren’t already talking about money, now is the time to do it. You both need to work through any anxieties and assumptions that you have about finances before it becomes an issue for you in the future. Furthermore, this puts down a solid foundation for you to eventually teach your child about making smart financial decisions.
Consider what values you want them to associate with money and educate them about how to use it wisely. If you don’t know much about finances yourself, now is the time to start teaching yourself. You can learn a great deal from videos, podcasts, and websites, or you could even take online courses in such topics as personal finance or investing.
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