What to financially expect when you are expecting?
Congratulations! You have a baby on the way and this is one of the most exciting times in life. You have chosen or thought about a name, searched online for strollers, car seats and the cutest baby gear, but have you thought about financial planning and what that means for your family? Here are some of the most important things to consider:
Health Insurance-Review the health insurance plans available to you. What works best for your growing family? This is one of the few times you can make changes outside of the enrollment period. You have 30 days from your child’s date of birth to enroll your baby. Mark your calendars.
Estate Documents-Do you have wills, financial powers of attorney, medical powers of attorney and medical directives in place? Have you thought about who you would want to be your child’s guardian if something were to happen to you? I recommend working with an estate attorney to create or update estate documents. Make sure you add guardian(s) to your will. An Estate Attorney and Financial Advisor can also guide you with beneficiary designations and creating any trusts for minors.
Disability Insurance-What coverage do you have at work? Can you add to existing coverage? Disability coverage is very important. Over the course of your career, you are 3.5 times more likely to become disabled than die. If you pay for disability insurance, you will NOT be taxed on your benefits. If your employer pays, you will be taxed on the benefits. Do you have enough coverage to pay for the family’s expenses if you are no longer able to work?
Life Insurance-What coverage do you have at work? How much coverage do you need? Would you want your mortgage paid off if you were to pass? How would you replace the loss of income for your family? Consider term life insurance as it is the least expensive and will cover you when you need it the most-when children are young and living at home.
College Savings-Start saving for college now. In state University of Delaware tuition and fees are about $32,000 a year. For a baby born today, the cost of 4 years of that tuition, assuming 5% tuition increase yearly is about $334,000. If you start putting away $350 a month into a College 529 plan returning 6.5%, you will have covered half of the tuition. If you wait until your child is 6, and put that same $350 a month away, you will only have saved less than 1/3 of the tuition. It pays to start earlier to have more years for compounding growth. I highly recommend putting cash gifts for children into their college savings as well. If Nanna or Pop Pop want to know what to buy your children, encourage them to contribute to their College Savings Plan.
There are so many factors to consider when making these important decisions for you and your family’s future and it can be overwhelming. These decisions cannot be made in a vacuum-they are intertwined and can be complicated. Helping our clients make informed decisions and guiding them throughout life’s journey is what we at Affinity Wealth Management do best. If you want guidance, call us at 302-254-6124.