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Having a baby changes almost everything in your life, from small things like the way you do laundry to big things, like financial decisions. There are many important money matters to keep in mind when you’re becoming a parent, but the following five considerations stand out.
1. The cost of having a baby
The costs associated with turning your baby bump into a cuddly bundle of joy begin with prenatal care expenses and end with the cost of delivery. The average hospital delivery costs almost $9,000, and it can climb much higher if there are complications.
To help determine some of the costs you can expect beyond delivery, use this online calculator that helps determine the cost of your baby’s first year.
2. Tax deductions
Bringing a new life into the world is not all about expenses. The IRS does offer income-tax relief starting the year your baby is born. The tax breaks begin with the standard exemption for the new household member and extend to the Earned Income Tax Credit and the Child Tax Credit.
You can also claim the baby as an extra exemption on your income taxes, which can slightly increase your take-home pay.
3. Life insurance … just in case
Nobody wants to think about something horrible happening, such as the death of a new parent who supports a family. Even worse is the prospect of leaving children without financial support if something does happen to a breadwinner who has no life insurance.
The two types of life insurance available are basic term life insurance and whole life insurance, which builds cash value over time. But how do you know which kind and how much coverage you need?
Term life insurance is more affordable for most young, healthy parents. Use Bankrate’s life insurance calculator to help you determine how much insurance you need. It’s also smart to talk to an insurance agent about how much coverage is best for your family.
4. A bigger house for a bigger family
As your family grows, your home may begin to feel cramped, or maybe you want to raise your children in a different location. A bigger home can provide more space for everyone in the family to live and be comfortable and more room to store everything and help families stay organized.
Consider how many bedrooms are needed to house the family, the investment value of the house being considered, and the financing terms you can get from your lender based on your credit history.
5. Saving for college
You can begin saving for your child’s college education before your baby is born by starting a 529 plan. It can be challenging to decide how much to save, though, when a child is years away from college.
Set aside an amount you can spare each pay period, and discuss your concerns with the 529 plan administrator to get advice on how much to save. Use Bankrate’s college savings calculator to help you plan.
Babies grow up fast, so there’s no better time than the present to examine the financial considerations that can impact your family’s quality of life over the coming years.