Summary
Congratulations! The next few months are going to be a whirlwind of new adventures and experiences with your new family member. You’re going to be busy between all the snuggles and diaper changes but make sure you make some time to look into these eleven key items that we’ve split into three categories:
- Nailing the basics (The first 30 days): basic admin, health insurance, and tax savings. Focus on getting these items completed during the first 30 days.
- Helping them get a head start: which kid-centric savings and investment accounts to prioritize first.
- Protecting their future: the three key things to look into to ensure your kids are protected if something happens to you.
Estimated reading time: 5 min
I. Nail the basics
This is the basic financial admin stuff that you’ll need to complete within the first 30 days. These are mostly making sure you get your new family member added to your health insurance and that you’re taking advantage of workplace and tax code benefits from having a child.
Get them a social security number
The hospital probably told you about this already but you’ll need to get them registered for a social security number. You’ll need this before you can complete a lot of the other steps here.
Add them to your health insurance
Don’t forget to let your HR team or health insurance provider know about your new family member. Those hospital bills are going to be pretty expensive without it. Most employer-sponsored health insurance plans require you to do this within 30 days.
Compare your health insurance options
While you’re at it, if you both have employer-sponsored health insurance plans, now is a good time to consider comparing coverage options between plans. The yearly cost difference between family plans could easily add up to thousands a year.
Update your withholdings
Let your HR team know you want to update your withholdings and coordinate with them on submitting an updated W-4. Having a child decreases your withholdings amount meaning you’ll get to keep more of what you earned in each paycheck
Sign up for Dependent Care FSA
If you’re both going to keep working, look into signing up for Dependent Care FSA. This allows you to use pre-tax dollars to pay for necessary childcare like daycare, nannies, etc. Coordinate with your HR team on the specific details of your benefits.
Don’t forget about the Child Tax Credit at tax time
This one doesn’t need to be done in the first 30 days but just remember at tax time you can currently get up to $2,200 in tax credits per child just for being a parent. There are some income restrictions on this so coordinate with your accountant.
II. Helping them get a head start
Start taking advantage of the tax and other benefits on offer for funding your child’s future. There are lots of other accounts and savings strategies out there but these two are the most common ones to get things going.
Sign them up for a Trump Account
If your child is born between Jan 1, 2025 and Dec 31, 2028 you’ll get $1,000 from the government to kick things off. The $1,000 isn’t automatic, you’ll need to enroll and your child needs to be a US citizen with a Social Security number. Whether you contribute more than that depends on how you feel about the account’s disadvantages and the other savings options available to you.
Learn more about Trump Accounts:
Set up a 529
Start saving for college. Your contributions to the 529 grows tax-free and remains tax-free if you use the funds for qualified education expenses. Many states also offer state tax deductions for contributions though each state has slightly different rules.
Here are some state specific 529 nuances:
- Four Unique 529 Benefits for Pennsylvania Residents
- What to do When NJ High Earners Don’t Qualify for 529 State Tax Deductions
III. Protect their future
Make sure you have a plan in place for taking care of your kids if something happens to you. These are the big three to nail down:
Look into getting term life insurance
Protect your family in the event something happens to you. Be wary of insurance sales people trying to convince you to get anything more complicated right now.
Get a will
What do you want to happen if you pass away? Who would take guardianship over your children?
Take it a step further and set up a trust
If you want to avoid probate or have more control over how your assets will be distributed over time.
Learn more about managing asset distributions:
Want some help?
I have two young kids and specialize in helping young families navigate the money, career, and family tradeoffs that come with this stage of life. Reach out to me at my email below if you’d like someone to help with the items in this post or with your broader financial planning needs.
Nathan
Founder & Lead Advisor
[email protected]
The Tradeoff
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Kangpan & Co. is a flat-fee financial advisory firm specializing in helping mid-career professionals navigate the career, family, and financial tradeoffs that come with this stage of life. This content is for educational purposes only and is not financial, legal, or tax advice. Consult a licensed advisor for help with your individual situation. Employees and clients of Kangpan & Co. may hold positions discussed in our content. Past performance is no guarantee of future results.