ASK CARRIE: Financial checklist for new parents

Dear Readers:

The new responsibilities that go along with the joys of becoming a parent can give even the most prepared couple a moment’s pause. And when it comes to providing financially for your new baby, it’s easy to feel overwhelmed.

But take heart. Yes, it’s true that the USDA estimates that it can take about $235,000 to raise a child from birth to age 17. But keep in mind that you don’t have to come up with that money all at once. With a little forethought and planning now, you can more easily handle the day-to-day needs as well as put your growing family on a path toward financial security.

Here are 10 things you can do to make life easier—and help ease some of your financial worries.

1) Make Sure Your Child Has a Social Security Number. If you checked “yes” and supplied the appropriate information when applying for your
baby’s birth certificate, the Social Security number should be on its way. If for some reason you didn’t, you can apply at an SSA office, but you’ll have to provide proof of your child’s U.S. citizenship, age and identity, as well as your own identity. It may seem like a hassle, but it’s worth it because you’ll need a Social Security number to get your child’s health insurance, open a bank account on his or her behalf or apply for government benefits.

2) Get Health Insurance Right Away. If you have insurance through your work, notify your employer as soon as your child is born. In the meantime, review your options to make sure you have the best combination of deductibles and coverage. If you provide your own insurance, don’t delay in contacting your insurance provider. There are time frames for adding a new baby to your policy in order to provide coverage retroactive to the date of birth.

3) Prepare for the Unexpected. An emergency fund is more important than ever when you have a child. After all, you have a very important person depending on you! Strive to have enough cash in an easily accessible account to cover three to six months of necessary expenses. If the unexpected happens—an illness or job loss—it will help pay the bills until you get back on your feet.

4) Look Into Life and Disability Insurance. A term life insurance policy should definitely be on your radar. Consider having enough to at least pay off your mortgage and debts, replace your income for several years and cover your child’s education. (In certain cases, other kinds of permanent life insurance may be a better choice depending on your goals and family needs.)

Also think about disability insurance, through your employer and/or an independent policy. What you are offered through work may not be adequate to fit your needs. There’s a lot more riding on your salary now.

5) Create a Will and Powers of Attorney for Financial and Health Decisions. Even if you don’t have a lot of assets, a will is essential to name a guardian for your child. It doesn’t have to be a complicated document, but I’d suggest consulting with your family attorney. If it’s not in writing, the state could decide who would care for your child. An attorney can also draft other basic estate planning documents such as powers of attorney, which provide authorized parties the ability to act on your behalf for financial and health care decisions if you are not able to do so.

6) Complete an Advance Healthcare Directive. This is different from a health care power of attorney and is sometimes called a living will. It designates the type of care you want in a life-threatening situation and allows you to appoint someone to make medical decisions for you if you can’t speak for yourself. It can be your spouse or anyone you choose.

7) Start Saving for Education. Everyone thinks about the enormous cost of college, but what if you want to send your child to private elementary or high school? Fortunately, with the new tax law, 529 accounts can now be used for all three, with certain limitations. A 529 is a great tax-advantaged way to save—and provides an easy tax-smart way for grandparents to chip in as well.

8) Plan for the Extras. While you’re focusing on savings, don’t forget about extras such as music lessons, sports and summer camps. Having a general savings account to cover these things will help you make choices that don’t break your budget. You might also consider opening a custodial account in your child’s name. This can be a good way to save and invest specifically for the extras, as well as provide additional cash for college expenses. Just keep in mind that your child will have complete control of the funds in a custodial account when he or she reaches the age of majority.

9) Save for Your Own Retirement. Being prepared for retirement is as important for your children as it is for you. Contribute at least enough to a 401(k) to get the company match and then contribute more to your 401(k) or an individual retirement account if you can (see savings guidelines for different ages). Your kids will be financially independent one day. You want to make sure you’re equally independent.

10) Check Your Employee Benefits. You may not have to do this all on your own. Many employee benefits packages include tax-advantaged accounts that let you pay for health and child care expenses with before-tax dollars.

One more thing to consider as your children grow: Start their financial education early so they learn to make good money decisions. A trip to the
store, handling an allowance, saving for something special—all of these provide opportunities to pass on your own values while teaching your kids the practical side of handling money.

This may sound like a lot, but it doesn’t have to be done all at once. The main thing is to plan ahead so you can enjoy every precious moment with your new baby.
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Carrie Schwab-Pomerantz, Certified Financial Planner, is president of the Charles Schwab Foundation and author of “The Charles Schwab Guide to Finances After Fifty.” Read more at http://schwab.com/book. You can email Carrie at askcarrie@schwab.com. The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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