Surprising Expenses for New Parents
April 10, 2009
As someone who’s been there, I know firsthand the abundance of expenses that fall into your lap as a new parent. Though your little bundle of joy warms your heart and amazes you on a daily basis, those cute little cherubs can cost you some serious money!
Between diapers, bottles, formula, and clothes, the smallest member of your family can run up some pretty hefty bills. And these items are just the beginning! Here are a few unexpected expenses that will be helpful to consider before your baby arrives.
Even if you have health insurance, you may need to pay deductibles or co-pays. Since the first year of life involves plenty of doctor visits, these expenses can really add up. Review your policy carefully so you know what to expect.
Some families decide to have one spouse stay home, but the loss of income may require lifestyle changes. Other options include daycare, home daycare with a friend or family member, or hiring a nanny. You’ll need to weigh the financial costs against your desires for your child before deciding which option is best for you.
Once you have a child, life insurance is more critical than ever. The amount needed is different for everyone, but a general rule of thumb is six to ten times your income. This will allow your family to continue in their current lifestyle as well as provide for college and other expenses.
So what can you do? To help cover medical expenses, find out if a Health Savings Account, or HSA, can benefit you. HSA’s are what I like to call “medical IRA’s”. They help you save for future medical expenses, and come with several tax benefits, and may end up saving you money! Find out more here! Or, ask your insurance agent if an HSA makes sense for your situation.
To help save for your child’s education expenses, consider opening an UGMA, or Uniform Gift to Minors Account. The interest earned is tax-free until they’re 18 years old. Find out more here.
Or, you can open a 529 College Savings Plan, which also comes with major tax benefits. Keep in mind, though, that these plans are not federally insured. Find out more about 529 plans here.
It’s a good idea to start saving for your children, and the expenses that they come with, as early as you can. Even if you start small, over the next 18 years you’ll be surprised at the new bundle (of cash) that you have!
Questions or Comments? E-mail me at blogger@matadorsmoneymatters.com.
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