Five Ways to Safeguard Your New Baby's Financial Future
By Candace Bahr, CEA, CDFA
Your beautiful new baby has arrived
and you think you've got the safety
thing under control. The house is
childproofed, you've got the pediatrician's
phone number posted on the fridge,
and a brand new car seat sits in
the back of your minivan. But
physical safety is just part of the
challenge. Unless you're Julia Roberts
and your baby has a multimillion-dollar
trust fund, you need a financial
gamelan that will keep your baby
financially safe in times both good
and bad. Here are five steps
to help you get started on the right
financial foot.
Step 1 - Get Life and Disability
Insurance
From
diapers to diplomas, the cost of
raising a child can really add
up. If something awful were
to happen to you or your spouse,
life and disability insurance offer
a safety net to keep your loved
ones' financial lives on track. You
can get an estimate of your insurance
needs by using the online calculators
at the non-profit Life and Health
Insurance Foundation for Education
(LIFE) at www.life-line.org.
Step 2 -Build an Emergency
Savings Fund
You
never know when your roof will
spring a leak or when the job market
will turn sour. Keeping six
months of income in a savings account
or money market fund can help weather
life's inevitable pitfalls. Try
setting aside money at the beginning
of the month, not the "extra" at
the end - there's rarely any extra!
Step 3 - Start Saving for
College
Your baby
may not even be crawling yet, but
with college costs rising 40% in
the last decade, it's a good idea
to start saving early. Consider
opening a Section 529 college savings
account. As long as you use the
account for qualified higher education
expenses, all distributions will
be tax-free.
Step 4 - Pay Less Taxes
Many
employers offer flexible spending
accounts which allow you to set
aside thousands of dollars in pre-tax
income to pay for qualified childcare
and healthcare expenses. Depending
on which tax bracket you are in,
using these accounts can save you
thousands of dollars a year.
Step 5 - Talk to a Pro
The
financial stakes rise considerably
when you bring a new child into
the world, which is why it's always
wise to seek the advice of a qualified
financial professional. Ask
for recommendation from a trusted
friend, family member, business
associate, or your lawyer or accountant.
At WIFE we welcome your comments. Please feel free to contact us.
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Bahr Investment Group (Carlsbad, CA)
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