Social Security Card

Be sure you apply for a social security number for your child upon birth. This is done in the hospital and is the very first essential financial step for your new born. You receive a tax deduction for giving birth called a personal tax exemption in the amount of $3,400. There are additional income-tax deductions and credits: child tax credit, additional child tax credit, child and dependent care credit, adoption expense credit, filing status change for singles to head-of-household. With these new tax deductions and credits you may be entitled to change your tax withholding and have more take-home on your paycheck.

Contact your Financial Planner or

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Review your life insurance policy

With the birth of a child there is a lot more responsibility. If the working spouse(s) should pass away, there would be a loss of income to the family. Life insurance proceeds come to the beneficiary tax-free and are used to replace the income that has stopped. The family must have income/cash flow to continue caring for your child and paying the expenses. Also, life insurance may be necessary for the non-working spouse since those family duties (child care) have to be taken into consideration. It is relatively cheap to purchase this essential "term insurance".

Contact your insurance agent or

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appropriate coverage at the best price available. ->

Review your Medical Insurance policy & work benefits program

The cost to give birth may range from $5,000 (easy birth) and rise steeply, depending on complications. Please verify that your medical insurance covers birth (and post birth shots, visits, etc.). You need to understand the costs you will be responsible for, know the doctors you can choose from (in network-out network) and know if your plan (or your spouses plan) is the best option for coverage at the best cost. Ask your company benefits department if they have a plan which allows you to pay for medical expenses and/or child care expenses from your pay check on a PRE-TAX basis. Most companies have a policy stating all monies you have taken out from your paycheck to pay these bills must be used by year-end..."if you don't use it - you loose it".

Contact your financial planner to review policy/coverage or

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Update or get a Will

A will is one of the most important estate documents and is essential now for each spouse. A will has 4 major components:

1. You name who is to receive your assets upon death.
2. You name who is to be the guardian for your children under age 18.
3. You name an executor who is put in charge to execute all your wishes.
4. You name a custodian to hold assets for your child if they are under-age.

Contact your lawyer or

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Create a Family Spending Plan (budget)

There is NO question having a child is one of your largest expenses (see first paragraph) and unfortunately, your income may also decrease at this time due to time off, maternity leave or quitting a job. If you know your spouse is going to quit or reduce hours or take time off, please incorporate this into your financial plan. Build up your reserves in advance of the birth to handle this period where you will have "less income" coming in to your household. As accurately as possible, estimate your new monthly expenses (with child) and be sure your cash in-flow is enough. Do not use credit cards to pay bills you cannot pay-off each month. Do not use your HELOC (home equity line of credit) to pay those bills that exceed your income. Remember to plan for a new/used mini-van if needed versus your existing 2-seater car. REMEMBER TO ACCURATELY ASSESS THE NEW COST FOR CHILD CARE (if parent returning to work place). Remember to accurately assess the new cost for private school/college. The cardinal rule applies now as in the past...please live within your means (with-in your income!).

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Save for College Tuition

The cost for this higher education, after adjustment for inflation, has risen 35% these past 5 years. Today, four year public school tuition, fees, room and board is estimated to be $12,796 and a four year private school is estimated to cost $30,367. The answer to this escalating cost dilemma: start now putting what you can afford into a 529 plan. A 529 plan allows one to place money into this investment account with all growth "tax free" as long as monies are pulled out for college education expenses. There may be a tax deduction for this contribution (depends on your state of residency) and the beneficiary (child) may be changed if the child decides not to attend college. The account may be titled in the name of a parent so all decisions on when, where and how this money is spent stays with parent. The maximum contribution to a 529 plan is $12,000 per year with up to $60,000 allowed in the first year (allowance per IRS code to fund 5 years up front - 5 years at $12,000 per year) but no additional monies from this person can be contributed until year 6 and each year after). These accounts have very little impact on the amount of financial aid a student may get, and since financial aid resources are shrinking, it is more important than ever to contribute to this account.

Update Your Beneficiary forms

Now is the time to add your child to your retirement account(s) as your contingent/secondary beneficiary (assumes your spouse is named as the primary). Different accounts (retirement and non-retirement) for different states (throughout the USA) have different rules for distributing monies to a child. Please seek out your financial planner and/or lawyer for the appropriate advice for your circumstances.

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