If you have kids or are thinking about it, you might wonder how your finances will change. Here are some of the big-picture items new parents may want to consider:
1. Do you need life insurance?
Carrying term life insurance is a wise move to protect children financially until they can support themselves. A payout from a parent or grandparent’s policy can take care of costs like caregiving, education and living expenses if a provider dies prematurely.
2. Does your job offer benefits for parents?
Along with family health insurance, some companies offer a dependent care flexible spending account. It allows a parent to set aside pretax dollars to pay for childcare costs so the parent can continue working.
3. How’s your emergency fund?
Financial instability can weigh on children, not just parents. It’s important to have a source of liquid savings that keeps up with inflation. This money can tide the family over and maintain a sense of normalcy in case of job loss, injury or illness.
4. Should you start a college fund?
Parents, relatives and family friends can support a child’s education by saving and investing money in a tax-advantaged 529 plan. Funds can be used for K-12 schooling and college. If the child doesn’t go to college, the money can be used for another relative’s education or the child’s retirement fund.
5. Should I cut back on retirement savings?
Financial experts recommend against this. The earlier parents save and invest for their own retirement, the easier it will be for them to reach financial self-sufficiency and avoid burdening their children.
Planning ahead can help parents reduce financial stress so they can focus on bonding with their children. Give us a call if you have questions about life insurance, health insurance or other life planning needs.