When my first child was born, my wife and I made sure we had a crib, decorated her room, bought lots of diapers and nervously awaited the big day. Okay, I was nervous. My wife was fine.
Financially, though, I played it by ear. Eventually I got around to starting a college fund. And 15 years later, I checked and froze my child’s credit. But other than making sure my little one was on our health insurance policy, I never really had a plan for what I should do or when I should do it. Here are some steps you can take once you’ve got the diapering down pat.
Two things you should tackle immediately:
Health insurance
Make sure to talk to your HR department before the due date to find out the window for adding your baby to your health insurance. If you didn’t do this in advance, give them a call. Many policies are retroactive, meaning they will cover health care visits that occurred before you got them on the plan, but there’s no reason to wait.
HSA/FSA contributions
If you have the option to participate in a Health Savings Account or a Flexible Spending Account, consider adding a little more to the pot. Many newborn expenses are available for reimbursement through these accounts, as are copays for well-care visits.
After you’ve gotten on a more normal sleep schedule:
A will
This is a tough discussion. When you’re talking about family to invite over for the holidays or to watch a football game, minor idiosyncrasies can be ignored. When you’re talking about someone raising your baby, it all becomes heightened. Do you want your child living with Uncle Ben and Aunt Joanie in Milwaukee? Or Key West? Do you want your kids to go to that school district? Do the people you’re considering have experience raising kids? There are so many things to evaluate now that you have a child. But don’t put it off – the last thing you want is a court to decide where your child would live.
College savings
Talk about a long way off – the little bundle practically fits in your hand and I’m concerned with college? You should be too. The average student today graduates with around $30,000 in debt (some research comes in just below, some just above). In 20 years will your child be graduating with that debt or more? The best thing about starting now is you have time on your side. You can invest for the next 18 years to build up college savings to hopefully cover – but at least help with – their college expenses.
Life insurance
You should also consider life insurance, especially if this is your first child (that assumes you already have insurance if this is child number 2 or more). Before, you and your partner/spouse may have had life insurance through work that would cover the funeral and perhaps a good party afterwards. However, now you need to be thinking about providing enough for this little one to become an adult. I’m sure you’ve seen the estimates of $200,000-$300,000 to raise a baby to age 18. That doesn’t include the Porsche when they turn 16 either! A proper life insurance policy can be critical if something unforeseen happens.
Freeze your child’s credit
Young parents have an advantage that I didn’t: the three credit bureaus will create and freeze your child’s (under 16 years old) credit report for free upon request. (If your child is 16 or 17 they can request a freeze on their own.) This is one of the outcomes of the Equifax fiasco in 2018.
And it’s really quite simple, once you’ve gathered the documents. Check online to see if your child has a credit report with TransUnion and Experian (you must send snail mail to Equifax). If they have no credit report, the credit bureaus will need to create a report before they can freeze it. With the letter asking for the credit freeze, I sent a copy of my driver’s license, my address information, copies of my child’s social security card and birth certificate, and a copy of a utility bill. You can visit the three main credit bureaus to learn more:
- Experian: https://www.experian.com/blogs/ask-experian/checking-to-see-if-your-children-have-credit-reports/
- TransUnion: https://www.transunion.com/fraud-victim-resource/child-identity-theft
- Equifax: https://www.equifax.com/personal/education/identity-theft/child-identity-theft/
Given most of us won’t open an account in our child’s name (at least until they are teenagers), it makes sense to freeze their credit. In fact, it would make more sense if the credit bureaus took it upon themselves to automatically freeze a newborn’s credit unless the parent tells them not to.
Is your house in order?
This assumes that your financial house is already in order. You should have three to six months (or more) of living expenses in case your job vanishes. You should be participating in your company’s retirement plans at least to the level of maximizing any free money they are adding to your account if you contribute. Your credit card bills should be under control, although having to furnish a nursery and buy diapers can cause those bills to rise.
You should also consider reevaluating your household budget or creating a budget if you don’t already have one. Life changes with a newborn. Some people will remain active and take the tyke everywhere. So you’ll need a seat for your bike or a jogging stroller. Others will stay home more. No matter. Diaper bags and blankets and clothes (they grow fast) and food and… it all costs money. Try to keep an eye on what you’re spending, what’s a one-time versus recurring cost, and work out or tweak your budget.
Congratulations on your newborn! You will face new challenges, some amazing and some headache-inducing. But it’s going to go fast. When my daughter was born, I talked to a client who told me to cherish the 3am feedings. Yeah, I thought to myself, you gotta be kidding. But too soon, the baby will sleep through the night and then there are no more quiet times of rocking your daughter as she sleeps on you. You’ll turn around and she will be off to college. Enjoy the ride.
Photo by Francesco Gallarotti