photo by jenb921
In case you haven't heard, the economy is in the crapper. And I don't know about you, but I'm worried. Really worried. I have a little girl's future to think about. I was looking for some free money advice and came upon a great article at MSN Money: New Parents' Top 10 Money Mistakes.
Here are the highlights of what you, as a new parent, should do:
1. Don't skimp on life insurance. Death is something we don't really want to think about, but if one or both of you die, your baby will be provided for. How much insurance do you need? According to the article, "people need five times their earnings, plus the total amount of their household debt, and enough to cover college tuition for their children." Get an estimate of your life insurance needs.
2. Get disability insurance. It's more likely that you'll get injured than die. If your employer offers a disability insurance plan, take it.
3. Don't get life insurance for your baby. If someone offers to sell it to you or says you need it, walk away. You buy life insurance only if someone's death would create economic hardship.
4. Start saving for college now. Once your kid is in high school, it's too late. Check out 529 savings plans (all states offer one) and Coverdell education savings accounts.
5. Remember to save for retirement. Saving for retirement comes first, saving for college comes second. It would be harder for your kid to support you in your old age than to figure out other ways of paying for college tuition.
6. Make a will now. This doesn't just apply to people with a lot of money. A will is a must in naming guardians for your child.
7. Don't overspend on baby gear. Sure it's fun, but it all adds up, and babies outgrow stuff fast. Get hand-me-downs (furniture, toys, clothes) from friends and family or shop in second-hand stores.
8. Look into tax benefits for parents. There is a child-care tax credit (if both parents work and your kids are under 13. You can claim $480 max for one child and $960 max if you have two or more kids, and a $1,000 annual child tax credit (if you have kids under 17) for couples filing jointly who have one child and earn no more than $110,000.
9. Don't open an account in your child's name. You may be saving this for her education, but once she turns 18, she can do whatever she wants with it. It's better to look into a 529 savings plan.
10. Do the math on the work or stay-at-home question. If one spouse earns only enough money to cover child care then staying at home probably makes sense. But there are other financial factors to consider like good benefits and 401k plans. The article suggests you "run a comparison of what it will cost to replace the benefits you need if you leave your job. Also, figure in how your other expenses and benefits will change. For example, if you leave your job, you will cut out commuting expenses and the cost of pricey work clothes." MSN has a cool calculator to help you figure out if it makes more sense financially to work or stay home.
I hope this helps you as much as it helped me. Happy financial planning!