Yes, having a kid is a beautiful, transformative experience that many fawn over and love (or pretend to love, at least). But there are also some major financial repercussions to having a baby. And If you don’t plan ahead, and know all that there is to know, you might find yourself vastly underprepared for the undertaking of parenthood. Here’s how to attain some financial peace of mind.
Update medical and life insurance
You’ve got 31 days, from the day your baby is born, to update medical insurance coverage. A “Confirmation of Birth” will be given to you by the hospital. You must deliver this to your insurance company. As your newborn baby will have at least seven checkups for vaccines in the first 12 months, this document is pretty vital.
It is also important to speak with a life insurance agent about getting a policy or updating an existing one. Make sure that both you and your spouse are covered on your plan, too. It’s a bit dark to think about, but it’s necessary to protect the ones you love, as well as to protect your newborn babe! On a lighter note, If you need to schedule medical procedures, think about doing so during the same deductible year as when you had your kid. Because of costs that relate to the new baby, you’ll probably reach your annual deductible. This is just one example – and a very rare one, at that – where your baby can save you thousands of dollars.
Revise budgets. Yeah. Definitely…
This cannot be stressed more highly. The increase in expenditures is going to be large. Everyone knows that. But most people don’t suspect just how large the increase will be. Thinking that diapers will be just a flash in the pan? I don’t think you realize just how many you’ll be going through. Moexpertsert recommends increasing your monthly budget, if you can, by 10 to 12 percent, especially if you don’t plan on leaning on your family and your friends too much. It’s even more true if you are having your first child. Outfitting a nursery from a name-brand store can easily cost in the thousands. With a first child, parents make large, one-time purchases such as swings, cribs, changing stations, car seats and baby toys. By the way, the national average cost of an infant in day-care is almost $11,000 per year. Just mentioning.
Records, records, records!
Make sure to keep all pertinent and related documents in a special safe area — generally a folder or desk drawer of some kind. What should be within this folder or desk are documents such as birth certificates, Social Security cards and immunization records. On the point of the birth certificate: There should be one copy for you and your spouse, one copy for your child when they grow up, and one for your guardian. Additionally, make sure that you’ve recorded and tracked all your bills, to make double sure that you didn’t pay more than you owed, or that you haven’t made payments twice on the same charge, or for the same procedure.
The dreaded estate *gasp*
When you have a child, you need to make sure that your will, as well as any trusts that may exist, are well reviewed and managed. Also, be sure to appoint a guardian (a guardian is somebody who has legal custody over the child as well as control over the assets left to them). Absent this guardian appointee, a court, not you, will decide where your child ends up.
Open a college savings 529 account!
Upon having a child, be sure to open up a college savings 529 account. Through this, you will be able to save for your child’s future. Funds contributed to the 529 plan account can be invested and grow tax-free and aren’t taxed when withdrawn to pay for qualified educational expenses, such as tuition. In addition, more than 30 states currently offer a full or partial tax deduction or credit for 529 plan contributions.
In 2018, the annual gift tax exclusion amount is $15,000. Beginning in 2018, each parent and grandparent will be able to contribute up to $15,000 annually per child and exclude these contributions from gift taxes.
Having a kid is a big deal. And, like many big deals, they can be pretty awesome. But they are also usually time-consuming and costly, and, if you don’t get prepared ahead of time, you might find that the big awesome deal becomes a big awesome pain in the butt.
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