Updated: Jun 5
Beyond the joy brought to parents from having or adopting a child, this is a huge financial transition in their lives. There are a number of issues to consider including how the costs of caring for a child will impact both their short-term cash flow and their long-term saving and wealth-building objectives.
In this checklist, we cover a number of financial issues that your clients need to consider when having or adopting a child, including:
Our clients will want to review their cash flow and update their budget to include the additional costs to their budget involved with raising a child. If one of the parents decides to be a stay-at-home parent, how does the loss of income impact their short and long-term financial picture? They should check to see if their employer offers any sort of assistance, such as childcare subsidies or extended paternity leave.
If our clients receive any cash gifts on behalf of their child, it’s wise for the parents to consider funding a 529 plan to help with college savings. They will also want to see if they can increase their funding to an HSA if they have one to cover increased medical costs on a tax-efficient basis.
Our clients will want to notify their health insurance provider in a timely fashion to ensure that the new child is fully covered. In selecting a pediatrician for the child, they will want to consider whether the doctor is part of their provider’s network.
It’s key for our clients to review and update life insurance coverage in light of the addition of a new family member.
Our clients will want to review their tax situation to ensure they take advantage of any tax credits that they may be entitled to relating to the child and any dependent care. If the child was adopted, they may be entitled to a tax credit related to that as well.
Having or adopting a child is a good time for parents to start doing some long-term planning around areas like saving for college or perhaps a child’s wedding. Estate planning issues such as updating Wills, Trusts, beneficiary designations, etc. should be front and center as well.
This is a comprehensive checklist of the types of issues that advisors should be discussing with their clients surrounding the birth or adoption of a new child. Clients are not always fully aware of all of the financial ramifications of this joyous addition to their lives. It is your role as their advisor to ensure they are equipped to deal with these issues, enabling them to enjoy their growing family to its fullest.
Becoming a parent, whether through childbirth or adoption, is a joyous and life-changing experience. However, it also brings significant financial responsibilities and considerations. To help new parents navigate this transition, Todd Pouliot from Gateway Financial has created a comprehensive checklist. In this blog post, we will explore the key areas covered in the checklist, including cash flow management, funding options for education and healthcare, insurance coverage, tax planning, and long-term financial planning. By following this guide, new parents can make informed decisions and ensure a solid financial foundation for their growing family.
Cash Flow Management: The first step is to review your cash flow and update your budget to include the additional costs associated with raising a child. Consider the impact of reduced income if one parent decides to stay home. Explore employer benefits such as childcare subsidies or extended paternity/maternity leave options.
Funding for the Future: If you receive cash gifts on behalf of your child, consider opening a UGMA or UTMA account or contributing to a 529 college savings plan. Additionally, evaluate your Health Savings Account (HSA) contributions to cover increased medical costs efficiently.
Insurance Coverage: Review and update your life insurance coverage to ensure it adequately protects your growing family. Consider the risks associated with raising a child and explore the option of insuring the child at a young age. Notify your health insurance provider promptly to ensure comprehensive coverage for your new child. Select a pediatrician who is part of your provider network.
Tax Planning: Take advantage of tax credits related to dependent care expenses and adoption, if applicable. Understand the phase-outs and eligibility criteria for these credits. Review your modified adjusted gross income (MAGI) and make any necessary adjustments to maximize tax benefits.
Long-Term Planning: Consider future expenses such as education and weddings. Start saving early for these financial goals. Update your estate plan, including creating a trust and appointing trustees to protect your children's assets. Review and update beneficiary designations, ensuring both primary and contingent beneficiaries are named. Appoint a guardian for your child in case something happens to you and your partner.
Becoming a parent is a remarkable journey filled with love and joy. However, it also requires careful financial planning to ensure the well-being of your family. By following the checklist provided in this blog post, new parents can proactively manage their cash flow, explore funding options for future expenses, update insurance coverage, plan for taxes, and address long-term financial considerations. Remember, each family's situation is unique, so consult with qualified professionals to tailor your financial plan to your specific needs. Embrace this new chapter of your life with confidence and peace of mind, knowing that you have taken steps to secure your family's financial future.