Financial Essentials for New Parents
When a baby is born, the natural preoccupation is with taking and distributing photos of the adorable child.
That's understandable, but financial considerations should not be far behind. These can include health insurance, parental life insurance, wills, estate plans, investments and other considerations that come with the little bundle of joy.
You can apply for a baby's
"Well before the child is born, parents should be talking to their health insurance company to make sure there are no gaps in coverage," advised Cathy Pareto, certified financial planner with
The pregnant mother is covered under her work policy, or that of her spouse, but if the baby needs medical attention after birth, you want to be sure about which policy the child will be included in, she said.
"Figure out who has the better health coverage -- mom or dad if they're both working -- and then get the baby on the right policy," said
Increase the life insurance coverage for both parents, said Pareto, since the loss of either will impact the surviving spouse and the child. "You don't have to get fancy," said Pareto, who believes a simple term insurance policy for 20 to 30 years is sufficient, and premiums will be cheaper than with a whole life policy.
The cost of life insurance will be greater if, besides covering debts left behind, the parents are also trying to pay for college and other expenses in the absence of a parent, said Hughes. With a term life policy, make sure it is a guaranteed renewable policy that assures your payment and coverage will stay the same for the life of the policy.
Make the baby's money a family affair. The child's financial future starts with the parents but can extend to grandparents, aunts, uncles and friends. The more, the merrier.
"A couple of months after our twins, Heidi and Cooper, were born, my husband and I set up and began funding a 529 college savings plan for each of them," said
She got the idea from her grandfather, who set up education accounts for all of his grandchildren. It's a concept that many families have taken to heart these days because the cost of a child amid economic uncertainty is serious business.
"Before your youngster is aware of what gifts are, you have time to ask relatives and friends who love the new baby to make contributions to a college savings account such as a 529 plan," said Hughes. "Start saving as soon as the child is born."
State-administered 529 college savings plans that give tax breaks to savers were introduced in 1997. Those plans with too much money in stocks got hammered in 2008, but they have since generally become more conservative in investment choices and fees have been reduced. Though some plans are offered nationally, check out what investments your state offers and the tax advantages that its plan offers to state residents.
"My son-in-law said when his son was born that a baby can play with a box and a spoon as a toy for a long time, but a contribution to a 529 plan is so much more welcome," recalled
The 529 plans are considered parental assets and treated more favorably for financial aid than UTMA (Uniform Transfers to Minors Act) accounts. However, if you pay all tuition, room and board out of the 529, you won't be able to claim an education tax credit. You may wish to invest outside of the 529 as well.
"Don't put a baby as beneficiary on any account unless you have estate planning documents that spell that out," said Hughes. "The parents, either before or after the baby's birth, should have estate planning documents reflect the need for someone to handle the trust and name the child as beneficiary so it all flows."
If parents don't alter documents when the child is born, the courts will need to cover the child, said Pareto. A child under age 18 doesn't have legal authority to take ownership of anything in the event that something happens to the parents. That places increased importance on the naming of a guardian for the child as well as someone responsible for financial decisions until they turn 18. This can be two separate people, she concluded.
- Five Quick and Painless Money-Saving Tips
- Considering a Credit Union? 3 Factors to Think About
- 2012 Social Security COLA: A Whopping 3.6 Percent
- Understanding Personal Bankruptcy in Difficult Times
- Why Women Should Manage Their Own Money
- How to Lower Your Gas Bill
- Financial Essentials for New Parents
- The Best Travel Rewards Credit Cards
- Living Together and Keeping Money Separate
- Pension-Raiding Epidemic Worthy of Condemnation
- What You Need to Know About Travel Credit Cards
- Vanishing Pensions Another Case of Corporate Greed
- Is Free Checking Going Extinct?
- Should You Use a Virtual Credit Card Number?
- 10 Ways to Tap Your IRA Early Without Penalty
- Should You Hire a Money Coach?
- The Twentysomething's Guide to Money
- How Couples Can Maximize Social Security Benefits
- 5 Factors That Could Put Your Pension at Risk
- How to Handle Awkward Money Situations
- Can I Afford to Quit My Job?
- How to Get the Salary You Want Even in This Economy
- Practical Steps Average People Can Take to Retire Early
- Are American Consumers Relapsing Into Debt Addiction?
- How to Complain to Companies and Get Results
- How to Catch up After a Retirement Savings Break
- Gen Y's $2 Million Retirement Price Tag
- Social Security: On Entitlements and Ponzi Schemes
- Reducing Debt Load Key to Financial Health
- Dipping Into Your Retirement Account to Pay for College
- Why Your Retirement May Not Be Permanent
- The 10 Most Difficult Retirement Decisions
- Retirees Increasingly Depending on Social Security
- Tougher Rules for Credit Bureaus Could Be On the Way
- Tips for Picking an Affordable Place to Retire
- One Move Could Boost Your Retirement Security
- 401(k) Withdrawal Mistakes to Avoid
- 6 Little-Known 401(k) Perks
- What's the Best Way to Save for College?
- How Do You Preserve Purchasing Power in a Tumultuous Economy?
- Steps to Financially Prepare Your Student for College
- How to Avoid Money Envy
- How to Make a Financial Comeback
- What New Inflation Formula Would Mean for Social Security Recipients
- How to Predict Your Social Security Payout
- Is Your Retirement Plan Obsolete?
- How to Strengthen Your Retirement End Game
- How to Avoid Online Shopping Scams
- Dodging the Real Estate Down-Payment Obstacle
- Will This Home Renovation Pay Off?
- Family-friendly Ways to Save Water
- 10 Reasons to Delay Retirement
- Why Celebrities Run Into Money Trouble
- What Are Your Rights When a Debt Collector Calls?
- 5 Crazy Money Ideas That Just Might Work
- Many Grocery Staples Are Getting More Expensive
- Vow Not to be a Financial Mismatch
- How to (Finally!) Agree About Money
- To Save Money Get in the Habit of Bargaining
- How to Cope With Retirement Sticker Shock
- How Can We Make 401(k) Plans More Like Pensions?
- 8 New Retirement Rules
- 6 Ways You Can Save Money by Going Green
- New Online Marketplace for Financial Advisors Stirs Up the Market
- AARP on Social Security: A Game-Changer for Entitlement Programs?
- Online Banking: Is It Safe to Bank Online?
- 10 Things You Should Know About Your IRA
- Author Maps New Phase of Life Between Middle and Old Age
- Don't Wing It with Frequent Flier Programs
- Appealing An Insurer's Denial Is Often A Good Strategy
- Midyear To-Do List: 12 Steps to Getting Your Finances on Track
- Life Insurance After 50
- Is Long-Term Care Insurance Right for You?
- Private Disability Insurance Can Cover You if Your Employer Doesn't
- Careful Planning the Key to Comfortable Retirement
- Should You Count on Social Security in Your Retirement Plan?
- How to Cope With a Forced Retirement
- How to Protect Your Corporate Benefits
- How to Retire on Social Security Alone
- Do You Have Unclaimed Property You Don't Know About?
- Solo 401K Lets Self-Employed Shelter More of Their Income
- 7 Ways to Stay Ahead of Inflation in Retirement
- Why We're More Dependent on Government Support Than Ever
- 7 Biggest Money Mistakes College Graduates Make
- Homeowner Savings Tips: What You Might Not Know
- Why Raising Social Security's Retirement Age Is a Benefit Cut For All
- How to Get Retiree Health Insurance Before 65
- Wills and Estate Planning: Peace of Mind for Your Family
- Put Yourself to the Test: Are You Fiscally Fit?
- 30 Ways to Cut Health Care Costs
- 7 Excuses for Not Saving for Retirement
- What Will Missing Mortgage Payment Do to Your Credit Score?
- Automated Retirement Plans Can Help But Watch for These Pitfalls
- How to Save for Retirement on a Low Income
- What to Do If You Cannot Pay Your Tax Bill
- High Earners Face State Tax Hikes
- 9 Ways to Pay for Retirement
- Is Your Partner a Good Money Match?
- 10 Things You Didn't Know About Social Security
- Don't Forget to Protect Your Retirement Plan From Inflation Risk
- Medical Deductions For 2010: What You Need to Know
- Look Beyond Sticker Price for a Car's True Costs
- HED Reverse Mortgages
- The Magic Numbers of Retirement Planning
- Can I Afford a Baby?
- 6 Ways to Cash In On the New Health-Care Reform Law
- The Least You Need to Know About Retirement
- Tax Changes for Health Insurance Buyers, Home Buyers and the Unemployed
- Small Changes to Get out of Debt and Save Money
- Is Your 401k Riskier Than You Think?
- 10 Places to Go Carless in Retirement
- Deducting Medical Expenses
- Public Support For Government Workers a Case of Pension Envy
- How to Spring Clean Your Personal Finances
- How to Save for Retirement Without a 401k
- What You Really Pay for at the Pump
- Converting Regular IRA to Roth: A Good Idea?
- Retirement Savers Need to Plan for the Critical Draw-Down Phase
- 9 Secrets of Retirement Happiness
- 401k Mistakes Job Hoppers Make
- Why Gen-Y Might Be Too Frugal
- How to Profit from your Hobbies and Interests
- Websites Make it Easy and Even Fun To Reach Savings Goals
- How to Evaluate College Financial Aid Options
- Find This Year's Investing Strategy in Last Year's Tax Return
- Tips for Filing Your 2010 Income Tax Return
- Bad with Money? Blame Your Parents
- The Financial Planner Relationship is a Fragile One
- 7 Reasons Why You Don't Have a Pension
- Tax Mistakes Parents Often Make
- SEC Takes Steps Toward Financial Planning Overhaul, But Issues Remain
- 5 Smart Ways to Save Money for Your Children
- Financial Advisers: Prepare for Big Tax Hikes in 2012
- How to Tweet Your Way to Retirement Goals
- The New 401k Plan: Not Just for Retirement Anymore
- How to Shop Around for the Credit Card That Suits You
- A Better Use for Your Tax Refund
Personal Finance - Financial Essentials for New Parents
(c) 2011 Tribune Media Services