Financial Checklist for New Parents: How to Prepare for a Baby

Welcoming a new child—whether by birth or adoption—is a magical experience, but it also brings a significant shift in your financial life. With so much to think about, it's easy to feel overwhelmed. But don’t worry, we’ve got you covered. Here’s a handy guide to help you navigate these changes and keep your financial house in order.

Budget and Cash Flow: What’s the Impact?

First things first: take a good look at your budget. Kids are amazing, but they sure do come with a lot of expenses. From diapers to daycare, these costs can really add up. And if one of you is considering staying home, that loss of income can make a big difference. Be sure to check out any benefits your employer offers, like Dependent Care Flexible Spending Accounts, childcare subsidies, or extended parental leave—they can help ease the strain.

And don’t forget to update your budget to reflect new expenses. Maybe you need to find areas to save or add new categories to accommodate your growing family. It might even be time to reassess your long-term goals to align with your updated cash flow.

Savings and Insurance: Are You Covered?

If you’re fortunate enough to receive cash gifts for your little one, think about opening a custodial account (UGMA or UTMA) and possibly a 529 plan to start saving for future expenses, like college. Speaking of savings, if you have an HSA, you might be able to contribute more—up to $8,300 for a family—which can be a smart move to cover those rising medical expenses.

This is also the perfect time to review your life insurance and disability coverage. You may need to increase your coverage to fund future child-related expenses, such as college costs or other big-ticket items down the road.

Health Insurance and Tax Benefits: Don’t Miss Out

Make sure you notify your health insurance provider right away—most plans give you 30 to 60 days to add a new child. And when it comes time to pick a pediatrician, double-check that they’re in-network to avoid any surprise bills.

When it comes to taxes, there are some key credits you don’t want to miss. If your MAGI is below $200,000 (single) or $400,000 (MFJ), you could qualify for the full Child Tax Credit, worth up to $2,000 per qualifying child. And if you have child or dependent care expenses so that you and your spouse can work, you might be eligible for the Child and Dependent Care Tax Credit.

Adopted a child? You might also qualify for the Adoption Tax Credit, which is worth up to $16,810. Plus, don’t forget to update your W-4 to adjust your withholding if needed.

Long-Term Planning: Time to Think Ahead

The arrival of a new child is a perfect moment to revisit your long-term financial plans. Whether it’s saving for future expenses like a car or a wedding, or making sure your estate plan is up to date, now’s the time to get everything in order. Consider creating trusts and appointing trustees to protect your child’s assets, updating your beneficiary designations, and appointing a guardian just in case.

And don’t overlook state-specific benefits—some states offer tax credits or deductions for 529 contributions, so it’s worth checking if you can take advantage of these.

Taking these steps now can help ensure that you’re fully prepared for the financial impact of a new addition to your family, so you can focus on enjoying every moment of this exciting new chapter.

Photo by Kelly Sikkema on Unsplash