STUDIO CITY (KCAL9) — A new baby costs money — so be sure to plan!
Casey Mervine, a Charles Schwab Financial Consultant, stopped by KCAL9 Tuesday to discuss financial tips for welcoming a newborn!
A recent survey shows 39 percent of parents aren’t actively managing their financial portfolios.
Here are some tips for adding a new member to the family:
UPDATE YOUR BUDGET:
- A new baby means new expenses. On top of the initial cost of having the child, be sure to factor in necessary expenses like diapers, formula and clothing.
- Also, look into how much childcare you will need, increased medical premiums and potential out-of-pocket costs for doctor visits.
ADJUST YOUR INSURANCE PLANS:
- As your family grows, so do your insurance needs. To make sure you’re adequately covered, notify your health insurance provider of your new dependent and consider buying life insurance in case anything happens to you.
CREATE OR ADJUST YOUR ESTATE PLAN:
- Among our survey respondents, 96 percent think of themselves as planners, but just more than half (56 percent) have a customized financial plan. An estate plan should be considered in your overall financial plan as it helps ensure that your money and other assets go to the people you choose.
- An estate plan isn’t just about leaving money to your kids. It’s also about appointing a guardian in case something happens to you. Without a plan, state laws will determine your beneficiaries; on top of that, an estate plan can help minimize estate taxes and other transfer taxes and help ensure that you and your affairs are taken care of in the manner you wish.
BEGIN SAVING FOR YOUR CHILD’S COLLEGE EDUCATION:
- According to a recent Charles Schwab study, 88 percent of engaged Americans say it’s important for parents to be active in their children’s education. One way parents can get involved early is by looking ahead and planning for college.
- A 529 Plan offers several benefits that make saving for college easy: Earnings are free from federal income tax, so your money can grow faster; You don’t pay any federal taxes on withdrawals as long as they’re used for qualified post-secondary education expenses; 529 plans have very generous contribution limits, often more than $200,000.
- Consider that a family who begins to save just $100 a month at a child’s birth can accumulate almost $35,000 by the time the child is 18, earning 5 percent interest per year. Wait until the child is 10 years old to start saving, and that’s reduced to less than $12,000.
BALANCE YOUR FINANCIAL PRIORITIES:
- For new parents, the tension of balancing financial priorities may be greatest between sending the kids to college vs. funding our own secure retirement. Asking your student to work and/or take out loans may not seem attractive now, but don’t forget that while financial aid is available for college, you’ll have a hard time getting loans or scholarships to fund your retirement later on. Taking ownership over your own finances can help teach your child about managing their own finances in the future.
- We at Charles Schwab recommend eight Savings Fundamentals to show you how to save for your financial future by prioritizing your savings. Follow the first four fundamentals in order. The final four should be completed based on your personal priorities and situation: 1) Take full advantage of employer match program, 2) Pay down high-interest consumer debt, 3) Build an emergency fund, 4) Maximize retirement savings, 5) Save for a child’s education, 6) Save for a home, 7) Pay down other debt, 8) Keep investing.
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