4 Financial Planning Steps Every New Parent Needs to Take

For Christmas Eve I have a special guest post for you, kind readers. Back in August Lucille Rosetti helped us with financial and legal issues for those helping seniors. These are issues I haven’t had to deal with personally so my advice is based upon an incomplete worldview. 

Today Lucille gives powerful advice for young parents. One point needs to be made before you read ahead. Lucille discusses life insurance needs for young parents. (See note in comments section for more.) While this community tends to refrain from life insurance, I don’t consider it worthless. There are times life insurance is a good idea. I’m not a fan of cash value life insurance with (very) rare exception. That doesn’t mean it shouldn’t be considered, however. Your facts and circumstances will determine your insurance needs.

You can read more of Lucille’s work on her blog, The Bereaved. She is also the author of Life After Death: A Wellness Guide for the Bereaved.

 

4 Financial Planning Steps Every New Parent Needs to Take

Lucille Rosetti

When you become a parent, another person’s life is in your hands. It’s scary and exciting all at once, and you only start to feel confident in your new role once you have a few years of experience under your belt. However, there’s one big step you can take now to ease your fears, and that’s handling your financial planning.

Financial planning is about more than funneling money into a retirement account. When you have a family, you need to take steps to provide for your family if you pass away. Without safeguards in place, a single unfortunate event could put your family’s security and well-being at risk. If you want a financially secure future for your children, these are the four things you need to do.

 

Write Your Will

A will does more than distribute your property after you pass away. If you have children, your will is the vehicle for naming the person who will care for your minor children if you die. In addition to naming a guardian, your will allows you to appoint a person, known as a trustee, to manage money left to your children until they become adults.

If both parents die without a will, the courts appoint a guardian for minor children. Babycenter warns that in some states, an administrator is appointed to manage your children’s money until they turn 18. If you prefer to name someone you know and trust to look after your children, a will is a must.

Update Your Health Insurance

Most health insurance plans require a new baby to be added within 30 days. If you miss that window, you may end up with an expensive gap in coverage. If you and your spouse have insurance through employer-sponsored health plans, compare plans to determine which offers better coverage for the price. If you’re unhappy with your current health plan, you can also use this time to switch plans because having a baby qualifies for a Special Enrollment Period.

Buy Life Insurance

Life insurance may not have been on your radar when you were child-free, but now it needs to be. A life insurance policy pays a cash benefit to your surviving family if you die during the coverage period. This essential financial support allows your family to make up for the loss of income and keep a roof over their head if the worst happens. Stay-at-home parents should purchase life insurance too, because the high cost of childcare poses a significant financial burden if the primary caregiver passes away.

Don’t just purchase the cheapest life insurance policy you find. There are different types of life insurance policies, and it’s important to understand the difference so you can purchase the right policy for your family. While many parents opt for a term life policy because of the lower premiums, spending more on a whole or universal life insurance policy lets you accrue cash value, turning the insurance policy into an asset that you can sell for cash in retirement.

 

Pre-Plan Your Funeral

You don’t need to pick out flower arrangements and headstones when you’re still young, but you should have a plan to pay for your funeral. If you don’t, you could put your family in the unfortunate position of struggling to pay for a funeral while beset with grief. At a typical cost of $7,000 to $9,000, that’s no small burden. There are several ways you can set aside funds for a funeral. You can name your spouse co-owner of a joint savings account, create a payable on death account and name a beneficiary, purchase funeral insurance or pursue another pre-pay option. Do your research to select the option that makes the most sense for you and your family.

Thinking about life’s what-ifs may not be pleasant, but it is necessary. If you fail to plan for the worst-case scenario, you could leave your family in a difficult situation without the necessary resources. Make these financial planning steps a priority when your child is born to protect your family.

Image via Unsplash

 

More Wealth Building Resources

Credit Cards can be a powerful money management tool when used correctly. Use this link to find a listing of the best credit card offers. You can expand your search to maximize cash and travel rewards.

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

A cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregations studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here.