Are you a first-time parent? If so, read this.
By: Garrett Shinn, CPA
When the new baby arrives, your life will change in many ways. Since some of these changes will impact your finances, you should create a strategy to put you and your new family in the best situation possible. In order to navigate successfully through the financial options available, follow these six strategies:
1.Create a spending plan: As a new parent, you will be tempted to splurge on your child. Without a plan in place, this spending can easily spiral out of control. Make a budget before you begin shopping, and stick to that budget. Another way to save money is by purchasing used clothing, which your child will quickly outgrow.
2. Protect yourself and your spouse: While your focus will be on the new baby, do not neglect to save money for your and your spouse’s retirement. Planning a solid financial future for yourself and your spouse is important, as failing to do so may burden your child later in life when they need to provide you with financial support.
3. Save for college: Once you have enough going towards retirement, start to save for your child’s college education by opening a 529 college savings plan. Remember, however, that saving for retirement should be your first priority. There are scholarships and financial aid available for college, but not for retirement.
4. Create a will: If you do not have a will, you should create one. Make sure to include who you would like to be your child’s guardian if something should happen to you and your spouse. Otherwise, the guardian of your child will be determined by the court.
5. Update your insurance: Make sure that both you and your spouse have adequate life insurance and disability insurance, which are often overlooked by new parents. Additionally, do not forget to add your new baby to your current health insurance plan.
6. Take advantage of tax benefits: Becoming a parent allows you to take advantage of several tax benefits, if you qualify. Examples include the dependent-care tax credit and the child tax credit. Your tax professional can help you navigate your tax return to realize these tax savings.
By considering these six strategies, you can avoid making the most common financial mistakes of new parents. You should use these strategies as a starting point to create a financial plan specific to your family, and continue to update your plan as your child grows older or your financial situation changes.
If you have any questions, please contact the Shinn & Co team at firstname.lastname@example.org or call 941.747.0500.