Preparing to welcome a new baby into the family is an exciting and joyous occasion, but it can also be a scary time with many unknowns. I would know; my wife Anna and I are preparing to do it for a third time with our newest family member expected to join us in May. In the midst of all the joy and chaos, through sleepless nights and emotional adjustments, it is easy deprioritize your finances. Planning ahead can help you avoid stress down the road and ensure your family is cared for. To make it easier on you or someone you know with a growing family, here are some initial steps we recommend taking:
Update Your Health Insurance
Health insurance will likely be one of the largest ongoing costs related to your baby. Before your baby arrives, contact your employer’s HR department (or your insurance provider) to find out what steps you need to take once your baby arrives. Many give you a special enrollment period within 30-60 days of your baby’s birth to add them to your insurance and make any changes to your coverage.
If you’re planning, I recommend reviewing coverage details regarding pediatric care, vaccinations, and possible hospital stays. Maybe this research will mean making adjustments to your coverage during the special enrollment period if you have multiple plan options.
Consider Life Insurance
The birth of a child often prompts parents to think about the future, especially when it comes to securing their child’s well-being. Life insurance is a key tool in ensuring your family’s financial security should something happen to you. It ensures that your family can maintain their lifestyle and cover expenses like childcare, mortgage payments, and education costs in the event of your death.
There are many ways to calculate how much insurance you should have, and the right amount differs for every family. Generally, a safe starting point is 10-16 times your income. You can err to the lower end of this range with two equal-income spouses. If there are large gaps in income, consider the higher end. We generally recommend insurance on both spouses, even if one has low or no income. If something happens to that parent, it will disrupt the remaining parent’s life, increase their childcare costs, and potentially reduce their income potential by needing to be more involved with your child.
Review Your Will and Estate Plan
Having a baby should prompt you to review and update your estate plan. If you don’t have a will, now is the time to create one. Make sure you appoint a guardian for your child in the event that something happens to you and your partner. Review beneficiary designations on your retirement accounts, life insurance policies, and other financial assets to ensure they reflect your wishes.
Congratulations to you and your growing family. My boys (and soon-to-be third son) have brought the most exciting moments in my life. No new parent sleeps enough, but hopefully, following these steps will allow you to sleep well when you do.
For more financial planning tips like budgeting, emergency reserves, and savings plans, please check-out Stan Moiseev’s blog, Creating a Financial Plan for Every Stage of Life.
Nic Cohen, CFP®
Financial Advisor
Opinions expressed are from Alaska Wealth Advisors as of the date of publication and believed to be accurate. Forward looking statements cannot be guaranteed. This material is not meant to be investment, tax, or legal advice. The information discussed herein is not a recommendation to buy or sell a particular security or to invest in any particular sector. Alaska Wealth Advisors (“AWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about AWA’s investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request.
