The birth of a child is one of the most exciting and fulfilling moments of a persons life, but can also be very stressful! While raising a child is no easy feat, proper planning can help smooth the transition to family life and more adequately prepare you for the personal and financial opportunities and unexpected obstacles that await over the next 18 years.
Here are some of the main considerations:
Complete a birth certificate – Your hospital will ask for all necessary information and then supply that to your states health department; at that time, you will be able to request a copy of the certificate this will usually be mailed to you a few weeks after your child’s birth has been recorded.
Apply for a Social Security number – This process consists of three steps: (1) complete Form SS-5 (Application for Social Security Number) and provide both parents numbers on the form, (2) provide at least two documents verifying your child’s identity, citizenship status, and age and (3) provide proof of your own identity.
Taking time off after work – Determine whether you and/or your spouse will be taking maternity or family leave; depending upon your employer, some leave may be paid or unpaid so be sure to consider this before requesting off.
Establish an emergency reserve – Establish and fund a checking or savings account to provide liquidity and a source of funds to meet unexpected needs.
Create a budget – Having children can be very expensive and your budget may now change each year, so it will be important to factor in any additional expenses that will be incurred by the child; also, be sure to consider any potential loss of income if one spouse cuts back on work or leaves the workforce completely in order to care for the child.
Review health insurance coverage – Most companies offer family coverage so be sure to compare costs between both of your plans to see if it makes sense to cover everyone under one plan or the other; remember: you have 30 days to add your newborn to your insurance policy.
Consider increasing life insurance coverage – Proceeds can help pay off existing debts, fund education expenses, provide income replacement to the survivors, and cover child care if the surviving spouse has to return to work.
Consider increasing (or purchasing) disability coverage – Oftentimes, an individuals earning power is their greatest asset; therefore, be sure to protect your ability to support your family in the event of an unexpected injury/illness.
Prepare for a change to your tax liability – Providing support for a dependent will add an extra exemption, but may also qualify you for certain child-related credits (ex. Child Tax Credit and Child & Dependent Care Credit).
Execute updated legal documents/review beneficiaries – Your new Will should include guardianship and testamentary trust provisions for your child, ensuring that your guardian of choice is appointed as opposed to someone picked by the court; it is also wise to update beneficiary designations on all applicable accounts.
Consider starting a 529 College Savings Plan – With the projected increases in higher education expenses, it is more important than ever to start saving early; even small monthly contributions now can lead to big savings later.
Savings bonds – If a child receives these as a gift, they can choose to report interest each year to take advantage of their lower tax bracket and deduction this can help to save them from paying a higher tax bill in the future.