Posted by The TaxAdvocate Group, LLC

Financial Steps for New Parents

Financial Steps for New Parents

Have you recently or someone you know had a newborn added to their family? With all the enthusiasm of a new child, it's easy for parents to skip some vital financial steps to follow. Here are seven tips that you can share with them or that you can consider:

Add the Child to a Health Insurance Policy

You want to be certain that your child is covered, and if you have insurance with your employer, you may not have enough time to include your child in your policy. You may also want to change to a less deductible plan if you are troubled about the potential costs of medical care for your child. If you are on a highly deductible plan and switch from an individual policy to a family, remember that you can now contribute another HSA until 2019 for an additional $3,500.

Update Your Will, Trust, and Benefit Allocation

A will goes beyond the mere designation of persons who will inherit their property. You can also indicate who will be your child's guardian if something happens to both parents. The decision about who can help raise your baby is too high, and you probably do not want the courts to decide if it's not for you. Your employer can even offer a benefit that allows you to write free life plans and other essential planning documents.

You can also add your child as a beneficiary to the accounts, trusts, and life insurance policies you own because there are more beneficiary assignments than you would like. This means that by neglecting to update these documents, you may misinterpret your child from a significant portion of your resources, even if your will divides everything equally between your children. If you do not complete the beneficiary form, your retirement accounts will go to your state, and your child may lose significant tax benefits.

Also, beneficiaries may be placed in bank accounts in the form of POD (payable on death), and ordinary investment accounts with a TOD ( Transfer on Death) form, which can generally be obtained from the institution keeping the account. Some states also permit you to include beneficiaries to buildings and vehicles. The designation of these beneficiaries allows the transfer of these assets without costs, delays, and lack of confidentiality inherent in the inventory process and at a price well below that of a trust.

Trust can offer other benefits, such as appointing an administrator to manage your child's money even after adults in your state, do you think an eighteen-year-old boy will know how to handle this money? If you decide to: write a report, you could see if your employer offers a prepaid legal plan that allows you to get legal services at a reduced price, including real estate planning

Make Sure You Have Adequate Life Insurance

Once you have decided who will take care of your child and what your child will inherit, you need to make sure he has enough money to live comfortably. It could be more difficult if your wife raised them as lone parents than when your guardian was a rich uncle. The good news is that your family could benefit from Social Security if something happened to you.

If that is not enough, you may have to take out life insurance. Since you only need insurance until your child can keep it alone, the insurance term covering this period is usually the most cost-effective option. 

Also, your employer may give you a delay after the birth of your child to take out additional life insurance without a medical examination. This can cost a lot less than buying a separate policy requiring a subscription, especially if you have health problems. Be sure to check if the strategy is portable. Otherwise, you risk becoming vulnerable if your health deteriorates and you leave your workplace.

Plan for Kindergarten Expenses

If you think you cannot pay because of limited income, try contacting your child care program in your state for financial assistance. If not, check to see if your employer is offering an FSA (Flexible Spending Account) account for which you can contribute pre-tax and that you can use for free for dependents' support costs. It is a question of obtaining an equal reduction of the marginal tax. Note that the FSA is meant to be used or lost, so you do not want to contribute more than you thought you would spend this year.

You can also claim a support credit based on your expenses, but it is not possible to use FSA and credit for the same cost. Generally, the dependency care credit is best for families in the tax bracket of 15% or less, while the RTA is the best option for higher-tax families.

Change Your Budget

Of course, child care fees are not the only extra fees you can have. Children are expensive, but you can do something to reduce them a bit. For example, it probably does not make sense to spend too much money on fast-paced clothes, especially when he's too young to worry about his look, and then buy baby clothes at discounted stores like Old Navy and black and even the transport routes. You can also buy toys and furniture used for your baby; they will not know the difference.

Consider Saving For School Expenses

I say "consider" because, as selfish as it sounds, you want to be sure that your needs are met first. This means paying all debts with high-interest rates (interest above 4% to 6%), creating an emergency fund with at least 3 to 6 months of necessary expenses, and retiring. After all, there is no financial assistance for emergencies or pensions. (It's like airlines are telling you to wear your oxygen mask before helping your children with the oxygen mask.) However, once you're ready to start saving money to help you pay your future tuition, there are some tax benefits options to consider.

Start Teaching Good Financial Habits

It's not too quick/early or late to start learning habits that can help shape a person's financial life. Even if they are too young to learn how to balance a checkbook, learning something as simple as resisting a marshmallow can make all the difference. As you grow up, you can help them further develop their discipline to delay their satisfaction, and eventually plan and save for their future. After all, seeing them grow up as responsible adults is something you cannot put a price on.

Conclusion

Does it sound a lot? Of course, this is only a small part of what parents do for their children.

The TaxAdvocate Group, LLC
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