In this blog post, we will discuss The 4 Most Important Financial Planning Steps Young Families Need to Know. Bringing a child into the world is a big step! Make sure you follow these steps to ensure you and your family are financially secure. When you’ve just welcomed your first child into your family, there is a good chance that you have a to-do list about a mile long. It is easy to get lost in the mountain of tasks that you have to complete as a new parent from buying baby supplies to attending regular pediatric appointments.
With all of these life changes happening at once, it is easy for financial planning to get pushed to the side. That’s why we’re here to provide parents with a guide to assist with financial planning as a new family.
The 4 Most Important Financial Planning Steps Young Families Need to Know
In just a few simple steps, you can make sure that your family is financially protected no matter what the future brings. Keep reading to find out how you can create a secure financial plan for your family with as little interruption to your new baby’s routine as possible.
1. Get the Right Insurance to Protect Yourself & Your Child
Getting your family insured will give you and your partner peace of mind. Make sure your new baby and your family are protected with health and life insurance.
The first step new families should take when planning for their financial future is to explore life insurance and health insurance policies. These are the most important types of insurance to consider when you’ve recently had a child.
A life insurance policy is a way that you can provide for your child in the event of your untimely death. Should the unthinkable happen while you are uninsured, your family will suffer the financial consequences. It is necessary to mention that it is strongly recommended that both parents take out a life insurance policy no matter their working status.
It is commonly assumed that only the primary earner in the family will require life insurance. In fact, it is also essential for the non-primary earner in the family to take out a policy as well. In the event of a loss of a stay-at-home parent, the funds from the life insurance policy will be needed to pay for child care.
For busy parents looking for the easiest way to get life insurance, getting life insurance with no medical exam could be the answer. You might be wondering how a no exam life insurance policy works—and we’re here to show you!
Getting life insurance without a medical exam is a way to expedite the insurance underwriting process. If you undergo the medical exam, you will have to wait up to 8 weeks for your test results and your policy approval. When you elect to get life insurance without a medical exam, then your underwriting process only takes a few days. If you are currently uninsured, skipping the medical exam is the best way to get coverage without any waiting period.
Once your life insurance is handled, you need to make some decisions regarding your child’s health insurance. Getting health insurance for your new baby is absolutely necessary—and it’s also fairly simple. First, you need to decide whether you want to place your child under a single-family policy or add your child to one of your existing policies.
This decision will be primarily based on the cost of coverage. So, when weighing your options, it is best to consider which option gets you the best coverage for your child at the best price. Additionally, you want to factor in the policy type that affords you and your child the best in-network providers and care. Even if you are adding your child to an existing policy you are familiar with, it is best to double-check how your coverage applies to pediatric services.
Plan Your Budget With Your Little One Included
Though this may sound obvious, it is essential to adjust your budget when you become a family. When you have a baby, expect that your budget will change significantly.
As you move from a couple to a new family, you can expect everything about your life to change—and that includes your budget. Now that you have a child to take care of, you will need to factor in the cost of healthcare, supplies like food and diapers, and saving for a college fund. We’ll talk more about saving for college in a later section of this guide.
For right now, we are focused on the budget planning process. To get you and your family started, you should list out your monthly income and your expenses—including all of the necessary childcare expenses. Once you’ve made the primary calculation to determine how much you have left over after your necessary expenses are covered, you can begin prioritizing how you will use the rest of your income as a family.
If you have enough additional income, we highly recommend starting an emergency fund. An emergency fund is an easily accessible bank account that you can use in the event of an unexpected emergency. This could include a medical emergency, damage to your car or home, or helping out a loved one in need. Life is so unpredictable, so it is important that you and your family save in preparation for the unexpected.
Begin the Estate Planning Process As Soon As Possible
As you make arrangements for life insurance and other protections, you should also begin the estate planning process. You can hire a financial advisor to help you with your estate plan.
Estate planning is another important aspect of financial planning for young families. Though you may not feel like thinking about your will, it is important to make sure that you are prepared—just in case. As you begin estate planning, there are a few things that you need to prioritize. For example, the first thing you should tackle when it comes to estate planning is your will.
Your will determines how your estate will be handled after you die and the type of care you want for your child in the event of your passing. If you die without a will in place, these types of decisions will have to be made in a courtroom which will put added stress on your surviving family members.
When you establish your will, you should also take time to establish your living will. Your living will direct your loved ones and medical caregivers in the event that you are unable to make decisions on your own.
Then once your living will is taken care of, you can move on to designating power of attorney for your health care and your finances. In some cases, both powers of attorney are designated to the same person. Your preference for who is in charge of making decisions should you become incapacitated will depend on your loved ones and your relationship with them.
Once all of your steps for estate planning are completed, you can move on to the last step for financial planning as a young family—saving for college.
Start a 529 Plan to Start Saving for Higher Education
You’ll be thankful you started saving for college at the earliest possible time. You can start saving for your future graduate with a high-yield 529 plan.
The last financial consideration you need to make as a young family is setting aside money for higher education. The cost of higher education is constantly rising—which means families need to start saving earlier than ever before.
Once you welcome your new baby into the world, you should consider setting up a 529 plan and begin saving for college. A 529 plan is a high-yield savings account that is designed to help parents save for college.
No matter the amount you initially have to contribute, you should start saving as soon as possible. Then, as your child grows older, you can keep adding to your growing fund until you have reached your savings goal. When it is time to start going on college visits, you know you are financially prepared to pay for your child’s higher education.
As you start making financial plans for you and your child, you can begin checking off these important tasks. Trust us, you’ll feel relieved when you have these financial considerations in place. Then, once you have all of your finances taken care of, you can focus all of your time and attention on your little one!