When a baby is born, parents generally receive gifts such as baby blanket, hooded towels and words of wisdom about sleeping schedules, etc. But nobody mentions about the long-term financial implications of having a baby in the family or how to budget for the growing family.
Creating a secure financial future for your newborn is one of the most important things young parents should do but often many of them do not know what to do and where to begin.
Here are four financial tips for young parents.
Look at monthly budget again
Everyone knows that after the arrival of a baby in the family they need to spend more, but most people do not realize that the increase will be significant. Apart from the significant expense on diapers, infant food and medicines, regular visits to the pediatrician, expenses pile up quickly in parenthood. More than ever, it is important to take a second look at your monthly budget and increase it at least by 10 for the first year to cover these expenses.
Generally, if it is your first child, your cash outflow on one-time purchases
such as swings, cribs, car seats, toys, etc., will be big. So, revise your monthly budget accordingly. Similarly, do not underestimate the day-care or nanny expenses if both parents are working full-time. It may add another `8,000-10,000 easily to your cash outflow.
Update medical and life insurance
Generally, it is rare to see insurance policies that cover the child from the day of birth. But, when the baby completes 90 days, she becomes eligible for health insurance. Adding the child to the health policy of your existing family floater health insurance policy is a must. Also, have a detailed discussion with your life insurance agent to get a new policy or update an existing policy. And make certain both spouses are covered for any situation.
Review your estate plan
It is essential especially after the first child’s birth to review and update your estate plan documents, including your will and any trusts. For instance, make sure to nominate a guardian for minor children in your will. A will is critical for parents of minor children because it allows you to name the person you trust the most to take care of your child, if parents die unexpectedly. A guardian is someone who has legal custody over the minor and control over any assets left to them including insurance proceeds, etc. Failing to do the above, the court will appoint one, which takes this decision out of your control.
Consider saving for higher studies
The term ‘consider’ means that you should start saving towards higher studies of your child after your needs are taken care (that is after paying off any high-interest bearing loans, building an emergency fund of at least three to six months of necessary expenses, etc.).
Making smart spending and saving choices now can help you put you and your new family on the path to financial peace. There is always time to improve your finances from where they are today. Once you are ready, start putting some money aside for higher studies of your child.
To conclude, the entire word knows that having a baby is expensive but follow the above tips to set off both you and your child on the path to financial success.