A Financial Milestone Checklist
As expectant or new parents, you likely are managing a sizable to-do list. Along with purchasing baby necessities such as a crib, car seat and diapers, you also will need to tackle the following essential financial-planning and life-planning tasks — for your and your family’s benefit.
CREATE OR UPDATE YOUR WILL
Name your child’s guardian, and designate how you would like your assets to be distributed, including the age at which your child will receive payouts, savings or investments. You can create a will online for a small fee or hire a financial, tax or legal advisor to help you. In your will, you also must name an executor — the person who will handle your estate when you die.
ADD YOUR CHILD TO YOUR HEALTH INSURANCE POLICY
Be sure to notify your employer or private insurance carrier no later than 30 days after your child’s birth, to ensure that your little one can receive benefits immediately. If you fail to do this, your baby may be denied coverage and you may have medical bills that go uncovered.
Still not insured? Shop for a private plan, or seek out government-supported programs. Some pregnant women and children qualify for coverage at little or no cost through Medicaid or the Children’s Health Insurance Program (CHIP). Go to www.insurekidsnow.gov, or call 1-877-KIDS-NOW to learn about insurance coverage in your state.
REVIEW YOUR LIFE INSURANCE COVERAGE
Review your policies and find out if your employer’s and supplemental life insurance plans provide enough coverage to meet your family’s needs should the unexpected happen. Take into account all child-related costs, including college tuition. If you don’t have a plan through work or you need additional coverage, read up on the topic or consult a financial advisor to find the right plan.
APPLY FOR YOUR CHILD’S SOCIAL SECURITY NUMBER
Your baby needs a Social Security number for health insurance, to be claimed as a dependent on your tax return and to receive government services. The easiest way to sign up is at the hospital when you apply for a birth certificate. You also can visit your local Social Security office.
For more details, visit www.ssa.gov and search Baby’s Social Security Number. Once a year, check with the credit bureaus to monitor your child’s number to prevent identity theft.
GET HELP WITH CHILDCARE EXPENSES
Find out if your employer offers a Dependent Care Flexible Spending Account (FSA). This allows you to set aside up to $5,000 a year of pre-tax income for childcare while you or your spouse work, look for work or attend school full time. However, if your household income is less than $43,000, you may save more money electing for the dependent-care credit on your income tax return. Consult a tax advisor to see which option is best for you.
SAVE WHAT YOU CAN, WHEN YOU CAN
There are many ways to save. Whether through a liquid account, Certificate of Deposit or a retirement fund, the most important thing is to get started now. And prioritize saving for emergencies. Aim to save a set amount, even if it’s small, each month. Ideally a family saves enough to cover three to six months’ worth of expenses. Plan to save larger chunks of money — such as your annual tax refund or year-end bonus — when those opportunities arise.
START SAVING FOR COLLEGE
If you start saving $100 a month for college the year your child is born, an account earning six-percent interest a year could build to $38,200 by your child’s 18th birthday. That compares to just $23,400 if you start five years later. Look into your state’s 529 College-Savings plan, or talk to an advisor about other college-savings options.
Address the above financial milestones now, and review them periodically as your family changes and grows. You will be weaving a secure safety net that proves its worth with less worry and hardship when life’s unexpected events occur.
For more financial planning tips, go to www.smartaboutmoney.org.