Among the many other roles and responsibilities that come the way of new parents, financial protection is perhaps the most important. After all, not only the immediate health is dependent on this, but also a child’s future. Any financial adviser will tell you that while a newborn baby may not need money for themselves, but it is a huge financial undertaking for the parents. Some of the first things to create financial protection for a newborn baby are:
- Adding the Newborn to the family Health Insurance Plan
Having a baby is a life event in itself, and insurances take into account all life events. This is because a change in your living status implies a change in your financial plans. During a life event, there is a window for you to make changes to the policy, add a new member, or move some finances around. 30-60 days is the window that most insurance providers offer for you to add your baby to the plan. When done within the given time-frame, a baby is covered retroactively.
- HSA Contributions
Health savings accounts are often underappreciated, but they offer great pre-tax benefits. These can be used to handle many current and future healthcare expenses. Also, any money that is put into this account and is not used simply rolls over into the next year, absolutely tax-free.
Once you have a newborn and happen to qualify for an employer-sponsored health plan, you can add the complete limit of HSA contributions to your plan. Since your expenses are bound to increase in the health area, this can form a great safety net. This money can be used for health-related services like formula, pumps, baby toiletries and doctor fees.
- Tax Forms and Tax Breaks
The new Tax Cuts and Jobs Act (TCJA) affects new parents in many ways. It removes the dependent exemption while retaining the claim for Child Tax Credit (CTC) and other benefits. Since the amount has been doubled, parents can save a lot more money through this. Additionally, the increase in income limit over which tax credit becomes applicable also makes room for more families to apply for these benefits. Earned Income Tax Credit and the Child & Dependent Care Credit are some other excellent tax-saving benefits that parents of a newborn can avail.
- Term Life Insurance
Getting term insurance depends on many factors, but if any person has a spouse, child or any family member dependent on them, then term insurance is necessary. A minimum monthly payment can help protect you and your family from unexpected disasters. Also, term life insurance can be surprisingly affordable, almost as much as a streaming service a young couple may be paying for. Life insurance calculators can help determine the coverage required for you and your family and can be purchased accordingly.
A newborn baby has many needs, and development in the early years in terms of health and nutrition form important foundations for life. Proactively working on finances and making full use of government-based tax benefits should be considered by all new parents.