Having a baby is a life changing event. Not only does this new addition convert a couple into a family unit, but the little bundle of joy may also impact how the couple views the world around them. If the financial impact of raising a family has not yet become a reality, this truth will become apparent after receiving the bill from the hospital for the labor and delivery process.
New parents can respond to this newfound reality in a positive manner by taking action. Having a baby is an excellent opportunity to review your current financial situation and set yourself up for future financial success. Three specific ways a baby can help jump start these plans include:
- Prepare a budget. If you haven’t already set-up a budget, now is a very good time. As noted in a recent publication by Wealth Management, an infant costs an estimated $12,600 each year for the first two years of life. Taking a moment to review how money was spent in previous years and whether or not adjustments need to be made to accommodate these new expenses can help a new family set itself up to absorb these new expenses more smoothly.
- Plan to cover children’s expenses. Parents can take steps to help ensure their child’s financial expenses are covered in the future. This can involve all stages of a child’s life, from putting together a will during infancy to dictate how assets will be used to raise the child in the event of a tragedy to ensuring your legacy continues through the child’s adult years by carefully planning out the distribution of an inheritance.
- Choose guardians. It is not an easy conversation, but it is wise for parents to choose who they wish to raise a young child in the event of a tragedy. If parents do not make this decision, the choice may be made by the state.
A big part of this process involves setting up an estate plan. Everything from preparing a budget to choosing guardians can be part of the estate planning process. Young parents can help ease this process by seeking legal counsel. An attorney can guide these discussions, helping to better ensure all potential implications are considered and accounted for while crafting the plan to meet your needs.