Financial Checklist for New Parents

Adding a baby to your family is overwhelming in many ways. You’re excited; you’re terrified; you’re anxious; you’re happy; you’re sad; you’re stressed. But the good news is you can tackle some of these feelings by planning ahead of time. One of the big stressors of bringing a child into your family is the financial aspect of it. This is why I have created a financial checklist for new parents. While you won’t be able to check most of these items off until after the baby arrives, this checklist will at least have you mentally prepared about what it is you need to do and approximately how your finances will change once your little one makes his/her arrival.

Before delving into the checklist, I wanted to share some interesting data points with you. According to a survey  conducted by LendEDU of 1,000 parents, the first year of caring for a child costs an average of $13,186. This money was spent on things like healthcare, food, toys, diapers, childcare and other miscellaneous expenses. This is why it is good to to have a plan ahead of time and the financial checklist I have put together below will help prepare you for the costs of bringing a new child into your family.

 

1. Add Your Child to Your Health Insurance Plan

Generally speaking, you have up to 30 days from birth to add your child to your health insurance plan. As long as your child is added within 30 days, all costs incurred in that time frame should be covered retroactively. For those of you thinking, what happens if my child is born outside of the open enrollment period? Don’t worry. Having a child is considered a qualifying life event, so you are able to make changes to your benefits after the baby is born.

2. Choose a Good Pediatrician

While choosing a pediatrician does not necessarily sound like it has a financial impact, it does. Do your research and find a good pediatrician that is in-network, to help you save on medical costs. Babies will have many visits to the pediatrician, so making sure your doctor is in-network will save you a lot of money in the long run because those visits will add up quickly if you are going to a pediatrician that is out of network.

3. Build an Emergency Fund

While in theory you should have an emergency fund whether you have a baby or not, it is even more important to have one when you’ve added another member to your family. An emergency fund is a savings account that is used as a safety net to cover the costs of unexpected expenses. Ideally, I would recommend building that emergency fund prior to the baby’s arrival because your finances will change significantly once you have a baby which will make it more difficult to cover unexpected expenses.

4. Contribute to Savings for College Tuition

Obviously saving for your child’s college education is optional, but for those who want to try to cover the costs of college, I suggest contributing to some sort of college savings account as early as possible. Nothing beats compounding interest, so the earlier you start saving, the quicker that money will grow. The most popular choice for saving for your child’s college education is by using a 529 plan.

 

5. Create a Will/Add Your Child to Your Will

Many people don’t think about a will when they’re young because the idea of anything happening to them seems highly unlikely. While that is hopefully the case, bringing a child into the mix makes you think again. Although it may be highly unlikely that anything happens to you, IF it does, you want to make sure your child is well taken care of. A will creates a plan for the distribution of your assets, as well as appoints a legal guardian for your child. Adding your child to your will ensures that in the case of an untimely death, he/she will be taken care of.

 

6. Update Your Beneficiaries

Most likely your current beneficiary for your money or assets is your spouse, if you have one. Again, in the case of an untimely death, you expect that your spouse will take care of your child/children, so leaving him/her as the beneficiary is fine; however, in the case of an untimely death for both you AND your spouse, you will want your child named as the beneficiary. I would recommend then making your spouse the primary beneficiary and your child the secondary beneficiary of all your assets.

 

7. Adjust Your Tax Forms

You may be interested in claiming your new dependent on your W-4, so that you have less tax taken out from your paychecks. If that is the case, you can make that adjustment immediately with your payroll contact or human resources department at work. Additionally, though, you should research all the new deductions and credits you may be eligible for when you file your taxes for the year. Some examples are the $2,000 child tax credit, child care credit, adoption credit and more.

 

8. Plan for Maternity/Paternity Leave

Prior to your baby’s arrival, be sure to check out your job’s maternity or paternity leave policy. The Family and Medical Leave Act (FMLA) entitles eligible employees to up to 12 weeks of unpaid, job-protected time off. Giving birth to a child qualifies you for FMLA leave. However, many companies offer some sort of paid time off in addition to or in conjunction with FMLA. For example, a job may offer paid time for 6 of the 12 weeks of FMLA. Research your policies ahead of time and plan for any unpaid gaps before you return to work. Paternity leave is also becoming increasingly popular, but is not required to be offered by companies. Check what your job offers to make the best plan for your family.

 

9. Get a Term Life Insurance Policy

Many of us forego additional life insurance because many companies offer life insurance to their employees. The problem is that these policies are only applicable while you are employed at that company. A good thing to consider is a term life insurance policy that will cover you for a certain amount of time, such as through whatever age you believe you will need to cover expenses for your child (such as through college). You may also choose a longer period of time.

 

10. Draft a Baby Budget

Although it is impossible to know the exact expenses you will incur to take care of your baby, you can definitely estimate it. I highly recommend creating a “baby budget” to help you get an idea of how your finances will change after the baby. This baby budget should include things like adjusting your pay to reflect withholding and/or health insurance changes, diapers, wipes, formula (if you choose to formula feed), child care, adjustments to income if you or your spouse will not be returning to work and life insurance premiums.

 

For any of my seasoned parents reading this, is there anything you would add to this checklist? Please comment below for everyone to see.

7 thoughts on “Financial Checklist for New Parents

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  1. This is a great list! My son is one already, but it’s great to consider this as we look at adding a second bundle of joy. I’m still working on 5 and 6 btw… time flies once they are born, so the more you can get done beforehand, the better!!!

    1. A belated congratulations to you!! I’ve still got a few weeks until my first arrives, so I’m trying to get as much done as possible or at least have these things top of mind once she’s born and hopefully complete them shortly thereafter!

  2. Courtney,
    My 2 cents worth, I do see many couples taking the Family leave sequentially, first mom then dad. That give them 12 to 16 weeks with their new born until they have to figure out the whole day care issue. I would add the day care issue to your list.
    This may sound odd, but when our daughter was born we moved to a new home in part to be closer to our church so that we could more easily send our daughter to school there. So while school may seem far off when your child is born, it is really right around the corner. Most kids start school with 4K and that’s less than 4 years away! So determining where you want to send your child/ren to school needs to be considered early as well in case you want to move into a certain school district.
    Keep up the good work!
    Alan

    1. Sequential Family Leave is a very smart idea, if you’re able to.

      I can’t believe I forgot a whole section on childcare. I only briefly mentioned it but I will be sure to update to include that because childcare is a huge financial decision to make.

      Regarding what you did for school for your daughter, I don’t think that sounds odd at all! Many people choose their forever home specifically based on the school district their child/ren would attend. That’s a great point.

      Thank you for your input!!

    2. Daycare isn’t school. Especially not for children under 3. I do hate that I have had to send all three around 6 months, but I have to work – so no way around it. But, I know what it is, I don’t pretend it’s something “better” or that it benefits them academically just to soothe myself.

      All of my kids (3) have gone to or are in daycare. I have seen many daycares lately try to brand themselves as schools, and it’s absolutely ridiculous. Only one of the 11 “teachers” and aides has a teaching degree or masters, and these are the people “teaching” my 3 year olds program (I also have a 10 month old in the same center). They try to sell their wonderful educational program, but I roll my eyes. I chose this daycare because it seemed the cleanest and safest (thought it’s expensive), that’s it, but it’s still nowhere near as good as my own home. My 10 month old would be better off with me, but oh well. (Financial) Times are tough.

  3. What a great list!

    Love #4… like you said it is never too early to start saving for college. Getting started too late can have a pretty big impact on parents…. student debt, cosigning, and stress.

    1. Thanks, Nate! I appreciate that.

      I absolutely agree. College may seem far away when your little one is just arriving in this world, but the earlier you start saving, the more you’ll have put away, ideally lessening the stress in the future.

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