Beyond the joy brought to parents from having or adopting a child, this is a huge financial transition in their lives. There are a number of issues to consider including how the costs of caring for a child will impact both their short-term cash flow and their long-term saving and wealth-building objectives.
In this checklist, we cover a number of financial issues that you need to consider when having or adopting a child including:
- You will want to review your cash flow, and update your budget to include the additional costs to your budget involved with raising a child. If one of the parents decides to be a stay-at-home parent, how does the loss of income impact your short and long-term financial picture? You should check to see if your employer offers any sort of assistance, such as childcare subsidies or extended paternity leave.
- If you receive any cash gifts on behalf of your child, it?s wise to consider funding a 529 plan to help with college savings. You will also want to see if you can increase your funding to an HSA if you have one to cover increased medical costs on a tax-efficient basis.
- You will want to notify your health insurance provider in a timely fashion to ensure that the new child is fully covered. In selecting a pediatrician for the child, you will want to consider whether the doctor is part of your provider?s network.
- It?s key for you to review and update life insurance coverage in light of the addition of the new family member.
- You will want to review your tax situation to ensure you take advantage of any tax credits that you may be entitled to relating to the child and any dependent care. If the child was adopted, you may be entitled to a tax credit related to that as well.
- Having or adopting a child is a good time for parents to start doing some long-term planning around areas like saving for college or perhaps a child?s wedding. Estate planning issues such as updating Wills, Trusts, beneficiary designations, etc. should be front and center as well.
This is a comprehensive checklist of the types of issues to discuss with your advisor surrounding the birth or adoption of a new child. You will better enjoy your growing family to its fullest if you are also aware of the financial ramifications of this joyous addition to your lives.