Financial Planning for New Parents
When a child arrives, the financial priorities are life and disability insurance on both parents, a will that names a guardian, updated beneficiaries, and a plan for the new monthly costs, with college savings coming after those are in place. Focused Financial Group helps new parents in metro Atlanta work through this list, usually in one or two meetings.
What should we do first?
- Life insurance on both parents, including the parent who stays home; replacing childcare and household work has a cost too. Term coverage for the years until the child is independent is the usual starting point.
- Disability income insurance, because a long illness or injury is more likely than death during the working years.
- A will naming a guardian, with your attorney. Without one, a court decides.
- Beneficiary updates on retirement accounts and policies, often to a trust for a minor child rather than to the child directly.
- Health insurance: a new child opens a special enrollment window, usually 30 days.
How much life insurance do new parents need?
A common approach is the income your family would need to replace until the child is grown, plus the mortgage and other debts, plus a college goal, minus savings and coverage you already have. For many young families that works out to a multiple of 10 or more of annual income, which term insurance makes affordable at young ages.
When should we start saving for college?
After the protection pieces are in place and you are capturing any employer retirement match. 529 plans grow tax-free for qualified education expenses, Georgia offers a state income tax deduction for contributions to its plan, and grandparents can contribute. Small monthly amounts started early matter more than large amounts later.
How do we budget for a child?
Childcare is usually the largest new line, followed by healthcare and the drop in income if one parent cuts hours. Rebuild the budget before the leave ends, and check whether a dependent care flexible spending account through work fits.
How Focused Financial Group helps
We run the insurance needs analysis, help you apply, give you the beneficiary and documents checklist to take to your attorney, and set up the college savings plan when you are ready. We do not provide legal or tax advice.
Talk with us
Call 770-250-7588 or use the Contact Us page. Video meetings work well with a newborn at home.
Insurance products are subject to underwriting and have costs and limitations. 529 plan withdrawals for non-qualified expenses may be subject to taxes and penalties; consult your tax advisor.