Having a child is one of the most rewarding investments you can make, but it certainly comes at a price. The U.S. Department of Agriculture reported last year that it may cost the average middle-class family $234,900 to raise a child born in 2011 to the age of 18. If you add in private school, college, family vacations, a new car or any of the other countless child-related expenses and baby costs, that number skyrockets even further. When it comes to figuring out how to prepare for a baby, there are all sorts of things you’ll never be able to anticipate. Luckily, the financial part of it isn’t one of them.
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Revisit Your Savings Goals
It is never too early to start saving for a family, especially because there are so many unknowns that pop up. Assess where you are financially and how a baby will add to your savings and debt reduction goals. Start saving for extra baby related expenses you can anticipate like missed paychecks during maternity leave, childbirth medical costs and furniture, diapers and food. Also, it is equally important to save up an emergency fund in case something unforeseen happens.
While it is an incredibly exciting time, be sure you don’t go overboard on outfits and top-of-the-line toys and furniture. Look for deals and see if your friends or family have any hand me downs.
Consider Tax & Estate-Planning Implications
The good news is that when you have a baby, you get a tax exemption and new child tax credit, so make sure you take advantage of it.
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With a child comes a lifetime of responsibility, and you need to plan ahead in case something happens to you. Work with a legal professional to draw up a will and set up a trust for your child. Designate guardians that will be entrusted with childcare and your child’s financial affairs.
Consider Childcare Options
Take a long, hard look at your childcare options and see if you need to plan for daycare or a nanny. If you or your spouse’s employment status changes, you need to consider the implications on your insurance and Social Security.
Maximize Your Insurance
It is important to get disability insurance to cover your pregnancy in case something goes wrong. Also, make sure that the breadwinner in your family has life insurance to protect your family for the long term. When you are planning on getting pregnant, you should revisit or upgrade your medical insurance to ensure you will get proper coverage for your pregnancy and you can visit your doctor of choice with your child.
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Look to the Future
Having a child could impact your living situation and you might need to move into a larger or more child-friendly home or into a neighborhood with better schools. A baby also forces your to reevaluate your working situation and you might want to try to get a job with full benefits, something with higher pay, or a position at a stable company.
While it seems far away, the 18 years until college will fly by. With the college price tag increasing, it is more important than ever to help save for your child’s college if you can. Look into 529 plans, which help you plan for future college costs, that allow you to save tax-deferred money until send your child off to college.
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