Financial Planning for New Parents
There is the classic guide for expectant parents, What To Expect When You’re Expecting, and then there is our guide for what to expect financially when new parenthood is on the horizon. Keep reading to learn the financial steps every new parent should take before and after the baby is born.
What To Do BEFORE the Baby
Whether you’re already pregnant or just starting to think about trying, now is the time to get your financial ducks in a row.
Work on boosting your emergency savings fund.
Aim to build an emergency fund with 3-6 months of living costs. This will provide a helpful cushion if you need to take unpaid leave from work after the baby is born. It also provides backup for any large hospital bills you receive or other unexpected costs that arise in your baby’s first year.
Start budgeting and planning for childcare.
This is one of the biggest decisions new parents have to make. The average monthly cost of full-time infant care is $718 in New Mexico. This may seem like a large line item to add to your budget. However, if one parent stays home with the baby, you have to deduct that person’s income from your monthly budget.
Depending on your situation, you may have a relative who can provide some free childcare or you may only need part-time childcare. It’s also worth checking your eligibility for Child Care Assistance from New Mexico’s Early Childhood Education & Care Department.
Whatever you decide, you’ll want to scope out options while still pregnant. Many daycare centers have months-long waitlists, so the earlier you get on the list, the better.
Prioritize your retirement savings over saving for your child’s education.
While college tuition can always be partially or fully financed with federal student loans, scholarships, and grants, there is no low-interest loan to fund your own retirement. That’s why financial experts advise new parents not to sacrifice their own retirement planning for the sake of their child’s college fund. Schedule a free consultation with our Financial Planning team to review your particular situation.
Of course, saving for retirement and saving for college doesn’t have to be mutually exclusive. Open a New Mexico 529 Education Savings Plan with as little as one dollar. Contribute what you can, when you can, including any monetary gifts your child receives on birthdays and holidays. A little goes a long way!
Del Norte also offers Education Planning & Funding services to help you stay on track to meet your financial goals.
Update your estate planning documents.
Now that you have a dependent child, you need to get your affairs in order. Consider your life insurance needs and update your beneficiaries on relevant accounts. You should also have at least a basic will that outlines who will care for your child in the event that both parents die.
Don’t go crazy buying too much baby stuff right away.
When you’re expecting your first baby, you’ll receive plenty of product recommendations from other parents. However, the swing that finally got their baby to nap, or the one bottle their baby would take, won’t necessarily work for your child. Babies have different temperaments and preferences, and you won’t know your child’s until they arrive. So, stick with the basics when registering for a baby shower and save any gift cards you receive to make additional purchases as needed. Get to know the local kids’ consignment or thrift shop in your area. Since babies go through clothing and gear so quickly, it’s pretty easy to find like-new items at heavily discounted prices.
What To Do AFTER the Baby
Congratulations on your new bundle of joy! In between feedings, sleep (hopefully!), and diaper changes, check these administrative tasks off your list:
Add your child to your insurance plans.
Contact your health insurance provider to add your child to your policy. Make sure to do this soon after your baby is born as most health plans require you to add a newborn within 30-60 days post-delivery. If you don’t have a life insurance policy yet, now is the time to get one. Del Norte offers Insurance Services to help you assess your coverage needs and find the right policy.
Update your tax forms to get the advantage of child tax breaks.
As of this writing, half the total Child Tax Credit is paid to families in advance monthly payments, while the rest is claimed on your income tax return. You can submit information on your new baby to the IRS to start receiving monthly payments. Certain income limits apply.
Make a household budget if you don’t already have one.
Expanding your family also means expanding your budget to account for the costs of having a baby such as childcare, diapers or formula, and more. According to the USDA’s “Cost of Raising a Child” report, middle-income families can expect to spend about $12,980 annually per child.
Increase your HSA contributions.
If you have a high-deductible health insurance plan, you may be eligible to open a Health Savings Account (HSA). While your baby’s preventive care visits will be 100% covered, anything else may need to be paid for out of pocket. So, increase your HSA contributions to save for your child and family’s future healthcare expenses.
Did you know that your HSA account can also be used to purchase certain everyday items such as first aid supplies, breastfeeding supplies, humidifiers and air purifiers, and more? It also covers the cost of some childbirth classes and lactation support appointments.
Schedule your complimentary consultation today!
Our financial professionals are ready to help you identify and plan for your current and future financial goals including retirement, emergency savings, higher education, insurance, and more. Schedule your free consultation today to begin the exciting journey of new parenthood in Northern New Mexico on solid financial footing.