Financial Roadmap for Parents

As a parent you have many responsibilities to balance. It’s important to create a financial plan with your children in mind. Consider these seven things when working on your roadmap.

Protect their future

There are plenty of financial strategies that can help protect your child against future financial hardship. Here are some of the most important:

Create a will. Use a software program or hire a professional to create a will for you and your spouse or partner. Make sure to name your child’s guardian and to designate at what age any payouts, savings, or investments will be distributed.

Get health insurance. If you are a new parent, notify your employer within 30 days of the birth of your child to ensure that the child is eligible for any dependent benefits. Purchase healthcare if you don’t already have it.

Purchase life insurance. Life insurance helps your family financially if you pass away unexpectedly. If you are employed, review your employer’s life insurance plan and determine if it is adequate for your needs. If your employer does not offer a plan or yours is inadequate, consider purchasing additional life insurance.

Save for child care. Consider establishing a flexible spending account (FSA) if one is offered by your employer. Parents can use pretax dollars to pay up to $5,000 in child care expenses in most states. You can also consider other ways to save on child care costs

Save for their future

It’s never too early to establish a savings account for your child. Here are some factors to consider:

College savings. Earlier is better when it comes to college savings. Consider saving $100 a month starting when your child is born. Shop around for the appropriate type of savings account for your child’s college fund .

Short-term accounts. Put money for short-term expenses (one to five years) in safe investments such as savings accounts and certificates of deposit (CDs). These low-interest- rate investments will not grow dramatically, but they will not lose money, either. Keep accessibility in mind: Will you be able to tap the investment when you need the money?

Long-term accounts. Money you will need beyond five years should have the opportunity to grow at a risk level you are comfortable with . Use a combination of super-safe, steady-earning savings accounts and more volatile stock and bond mutual funds to provide flexibility in timing your withdrawals. This strategy can help protect you against having to take losses when you don’t want to.

Adding another member to the family can be exciting—and a little intimidating. Prepare yourself and your household before the arrival of your child, and help put them on the path to a secure financial future.