Financial Tips for Starting a Family

Starting a family will bring lots of joy to your life. You're also going to have some expenses down the road. Start planning and saving now for daycare and a college savings plan, so you'll have money in the bank when you need it. We've provided some steps that might be helpful with your planning before you welcome your new addition.

Reshuffle your budget

When you add baby items to your expenses, you'll probably need to adjust some of your regular expenditures so that you still come out ahead. Find out how much it will really cost to raise a child.

Create a special savings account

You might need extra money for a few medical expenses that aren't covered by your insurance as well as for diapers, clothes, and other essential baby items. Choose a savings account that's right for you so you'll have some cash on hand when you need it most.

Open a Coverdell Education Savings Account for your child

You (or your family and friends) can put away up to a total of $2,000 a year per child under age 18 in this type of account. The money grows tax-free, and withdrawals are tax-free as long as they're used to cover the cost of college (including tuition, books, fees, and supplies) for the child who is named as the beneficiary. And if the beneficiary doesn't use it, the money can be transferred to a sibling and certain other family members. Learn more about an Education Savings Account.

Manage your debt

If your credit card balances have gotten out of hand, now's the time to start reining them in. Learn what it will take to pay off your balance and if you should consolidate your credit cards.

Tax withholding and child care tax credit

The more allowances you claim on your W-4 form (you filled this out when you started your job), the more you take home in pay. Ask your payroll manager for instructions on how to add an extra allowance for your child. Additionally, you may be able to claim a tax credit if you use childcare. To be eligible, you and your spouse must work at least part-time and your child must be under age 13 (some restrictions and exceptions apply).

Your will and estate plan

Should you and your spouse die without a will, the court will distribute your property according to the laws of your state - and those laws may provide for a different distribution than you would have wanted. Consult a lawyer to set up a will so that your assets are distributed exactly according to your wishes upon your death, i.e., to your children or otherwise. Additionally, a will allows you to name a legal guardian to take care of your child. Protect yourself, your spouse and your heirs with a sound estate plan. Find out the best option for estate planning for your needs.