Financial Check-Up for Expectant Parents
Is there a baby on the way in your family? Here are some things to think about:
- Life insurance – Parents should make sure they have enough life insurance to pay off the mortgage and support their children if they pass away. Don’t waste your money on expensive life insurance policies. Use cheap term insurance to cover you until the children are done with college or you retire (whichever comes first). Don’t buy life insurance on the baby. It’s a waste of money.
- College savings – With college costs continuing to soar, it’s important to get an early start on saving for the new baby’s college. 529 plans allow you to save in an account that grows tax-free, if it is ultimately used for education. Minnesota also has a state income tax deduction for up to $3k of 529 plan contributions. Every little bit helps.
- Disability insurance – Make sure you have some disability insurance coverage (often provided by your employer). When my daughter Raelyn was two months old, I was in a bad bike accident. I shattered my left arm. I was fortunate in that I only missed a week of work. If it had been worse, I would have needed to rely on my disability insurance to pay the bills while my wife took care of Raelyn and me.
- Check your tax withholding – The child tax credit means you’ll owe less in taxes starting the year your child is born. You may be able to reduce your withholding, which will help you balance the monthly budget (diapers are expensive).
Call me if you have questions about any of that. You should be spending your time getting everything else ready and enjoying sleep while you can, not fretting about financial stuff.