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7 Step Financial Checklist for New Parents

April 21, 2023

Table of Contents

    Table of Contents

      Parenthood is sure to be an exciting journey for everyone, but don’t let financial worries dampen this phase. Take a look at the checklist below and prepare yourself for a blissful parenthood ahead.

      If you've ever laid in bed and wondered, "Will I raise a nice child?" Is this something I'm prepared for? Do you feel like a financial checklist would help you as a new parent?

      Nothing transforms your life like the arrival of a new baby.

      You could be experiencing a range of feelings, from excitement and happiness to uneasiness and even full-blown dread.

      Not to mention the burning question on many new parents' minds: "How much money should I have stored before having a baby?"

      Becoming a parent is probably the most life-changing experience that many people will go through.

      You are suddenly responsible for yourself and your baby, who is entirely reliant on you.

      Preparation is essential while embarking on this thrilling (and maybe terrifying) new experience. It's imperative to be financially prepared before the baby arrives.

      If you still feel you're not prepared enough, here is an easy checklist to get you covered for parenthood

      Include your child in your health insurance policy

      Having a baby is a significant life event, and you should enroll the newest member of your family in your health coverage or get a new one just for the baby. 

      If you plan on adding your child to an existing cover, then most plans require your child to be added within 30 or 60 days of birth.

      If done within that timespan, your child should be covered retrospectively.

      You can account for anything typically covered under that policy between birth and enrollment. 

      Purchase term life insurance

      While many young parents realize they should purchase life insurance, they often wonder if it's worth it.

      After all, we all intend to be around for a long time. If you have a partner, kid, or another family member financially dependent on you, the answer is simple: it most certainly is.

      Like other types of insurance, life insurance is intended to financially safeguard you and your family in exchange for a monthly fee.

      Many individuals are unaware of how economical life insurance, specifically term life insurance, may be. 

      Term life insurance coverage for young and fit adults can cost less per month than many audio or video streaming services, giving the financial security your family requires in an unexpected disaster.

      Because the amount of suggested coverage varies depending on various factors, life insurance tools can assist you in determining the proper coverage for your family and purchasing a policy appropriately.

      Make a will and designate beneficiaries for your funds

      Preparing a strategy for your children in case of your unexpected demise is vital.

      A will specifies how your assets will be divided and names a legal guardian for your children.

      Most people choose their children or surviving spouse as beneficiaries of their banks, ensuring that any assets or money they possess are passed on to them.

      You can also appoint a guardian of the estate to manage the funds and assets until your kids reach legal age.

      A certified will can help you avoid long legal fights over who owns your possessions and lays out a plan on how you intend to provide for your kids.

      While filling out the relevant documents and consulting with an attorney, discussing your desires with your parents and children's possible guardians can help pay for a will that's efficient and works well for your kid. 

      Having a will doesn't mean you're creating a legal testament etched in stone; you can amend your will at any point in your life and make ways for new/revised clauses. 

      Consider purchasing long-term disability insurance

      While life insurance is intended to provide a financial cushion in the case of your death, disability insurance provides coverage if you get ill or injured and are unable to work.

      Disability insurance will reimburse you a percentage of your earnings for the period indicated, so consider your current income, expenditures, and savings when selecting a policy. 

      Disability insurance can be either short-term or long-term, typically available through your workplace or a private provider.

      When evaluating coverage, keep in mind that your living costs will rise as your child grows.

      Make a family budget

      A new child means new expenses.

      The average Indian family will spend an extra Rs. 1.5-2 lakh yearly raising a child.

      Baby clothes, diapers, baby food, and other childcare costs can quickly pile up on all pregnant and postoperative medical expenses. Some expenses, such as nappies and new toys, are recurring, while others, such as a stroller or car seat, are one-time purchases. 

      It will be useful to understand what "upfront charges" will be a momentary knock to your purse and what ongoing costs will have a long-term impact on your budget.

      Online budgeting programs such as Mint and Personal Capital may make this process as pleasant as possible.

      Set up a fund for unexpected expenses

      Unemployment is always stressful, but it becomes even more overwhelming if there's a family to look out for.

      Because of this, it is wise to maintain an emergency fund that can pay for six to twelve months' worth of living expenses in case your employment gets terminated or changed. 

      A new parent must have an emergency fund, which should be estimated based on the new family budget.

      This will provide a comfortable buffer for you as a new parent, especially if you intend to seek new career opportunities. 

      Suppose you're the only partner contributing to house income; in that case, it becomes all the more important to have an emergency fund on standby in case of any financial crisis that befalls your family.

      Start putting money down now for your child's education after high school

      The cost of undergraduate education at one of today's cutting-edge private colleges might range from Rs 500,000 to Rs 11,000,000 yearly.

      The price of a college education is expected to keep rising in the years to come.

      Currently, the cost of a degree in engineering that lasts for four years is approximately 12 lakhs. It is anticipated that the price will be close to Rs. 31 lakh in the next ten years, while the cost of an engineering degree will be Rs. 61 lakh.

      You can apply two categories to your savings: essential and discretionary.

      The funds that fall under the category of "discretionary savings" are motivated by a purpose unique to each individual. This might be a certain automobile, property, or even a favorite vacation spot, but it could also be something else.

      On the contrary, emergency savings are meant to be used for circumstances you cannot avoid. These include a fund for unexpected expenses, a corpus for your retirement, and college savings account for your children's future education.

      We may claim that people can delay the goals they have set for their discretionary finances without much of an impact on their family's well-being, but we cannot say the same thing about the goals they have set for their critical funds. 

      To Conclude

      Don't know how to get started? Long-term goals like starting a college fund may take a back seat to shorter-term necessities like health insurance and maternity leave arrangements before having a baby. When that's finished, move on to the next phase.

      Having just become parents, how do you feel? Is there financial harmony between you two? It's important for you and your partner to pause and appreciate the changing seasons as your baby grows. 

      Even a monthly review might help you make necessary adjustments to your spending and plans. In little time, you'll have settled into your "new normal," working to provide a stable environment for your new family while establishing a solid financial footing.