Expanding Your Family

Full Transcript:

Having children can be one of life’s greatest joys. They give you a sense of purpose, a legacy, and even some tax breaks. Let’s discuss a few things you should consider when expanding your family.

We have two young kids, Evie and Theo. They are incredible! They also increase the complexity of our household’s finances. Here are some of the financial decisions new parents need to consider.

Before having kids, you’re going to want to build up a cash reserve to help with all of the expenses. This needs to be especially large if you’re looking at multiples, adoption, or fertility treatments.

Next, you’re going to want to make sure you have the right amount of life insurance. The ideal time to get life insurance is before getting pregnant, as pregnancy can increase risk factors like high blood pressure. I always recommend that clients look at term life insurance first and generally should stay away from whole life, universal life, variable life, or any other complicated, expensive insurance product. Keep your insurance separate from your investing.

Next, you’re going to want to plan your parental leave and look at adding a vacation to your allotment. Do this through purchasing vacation during open enrollment as well as trying to roll over previous years of vacation.

There are a lot of things to consider when looking at health insurance. To start, you’ll probably have higher medical bills, so you’ll want to be on a lower deductible plan like the PPO. Once pregnant, you’re going to want to make sure that the hospital and other service providers are in network. And you’ll also want to contact your health insurance to get a free breast pump.

And lastly, let’s talk about daycare. Daycare is expensive. When you’re looking at daycare, you’ll want to get on the waiting lists early and often so that you have a spot for your child when you want to go back to work. Additionally, use the dependent care FSA. Once you know when those expenses will occur, the dependent FSA lets you take pre-tax money and get reimbursed for daycare expenses tax-free. Just make sure you’re using that in the single year as this account is use it or lose it.

Okay, now let’s talk about after the baby’s arrived. Hopefully, everybody’s happy, healthy, and not too sleep-deprived. One of the first things you’ll want to do is get your new child on your health insurance. You have 31 days with the Shell plan from the date of birth to do this.

Next, you’re going to want to update or create an estate plan. Do this with your attorney and make sure that they’re adding a guardian named in there for your child, should something happen to you. Also, you want to update your beneficiaries within your accounts, like your 401(k), as these pass outside of probate. You don’t want money that you intend for your children to be going to your mother.

Next, you want to look at your tax withholding on your paycheck. When having kids, you get $2,000 tax credit per child. Get that money now instead of getting an oversized refund next year.

And lastly, you’re going to want to apply for a Social Security number and start saving for college. Check out a previous video of mine on super funding college savings to help you get a head start on that.

Lastly, and most important, take care of yourself both financially and otherwise. The best you will make the best parent.