Planning for a new baby

Before your baby takes his or her first steps, you'll want to start taking a few of your own. It's never too soon to start thinking about budgeting for a child, planning for college expenses, considering tax implications and insuring your family now and over time.

Take care of family business

First, think about what's most important to you and your family. Consider these questions:

• Is staying at home with your child an option you can or want to consider, or will you need to find daycare?
• If you choose daycare, do you prefer in-home, full-time or part-time? Depending on where you live, costs for an infant average $378 – $1,215 per month, or $4,542 – $14,591 annually¹.
• Have you estimated your new budget? Will you have to cut back in some areas?

Plan for new expenses

If this isn't your first child, you're already aware of some of these costs:

• Groceries. Diapers and formula alone can add more than $100 per month to your bill.
• Housing. You may need more space as your baby becomes mobile.
• Transportation. A larger, safer or more reliable vehicle may be something to consider.
• Clothing and household items. Stocking up on baby essentials, such as furniture, bedding and clothing can be costly. After that, your per-month budget will be higher, too as your child's needs (and sizes) change.
• Medical. Larger insurance premiums, doctor visits and co-pays may affect your bottom line.
• Child care. Compare the cost of professional child care against what you'd lose in annual income if one parent quit working to stay home. You might be surprised.
• Education savings. Make monthly contributions into a Coverdell education savings account or 529 prepaid tuition plan, buy Series EE bonds, or explore other college savings options.
• Emergency savings. If you haven't already done so, now is a good time to build a fund for unexpected illness, job loss or other surprises. It should be enough to cover your living expenses for at least three to six months.
• Retirement savings. With new baby expenses it can be tempting to cut back on saving for retirement. But securing your own future is especially important if you have children — you don't want them to be responsible for your future health-care or housing costs. Try to save at least 10% of your salary.
• Life insurance. Explore insurance options so that your child will be cared for should something happen to you or your spouse.

Other financial planning considerations for new families

Adjusting your finances for a new child can have a major impact on every corner of your financial life. You may wish to talk to a financial advisor, legal or tax professional to help you plan for more complex questions such as:

• Have you reviewed your employee benefits package to consider your new addition, including health care, life and disability income insurance options? Do you need additional insurance protection?
• Do you have a plan to review and update your beneficiaries?
• Have you executed or updated a valid will? Should you designate a durable power of attorney or health-care proxy?
• Have you discussed ways to resolve competing needs to save for retirement and education?
• How might your federal and state income tax situation change? (e.g., child credits, exemptions, use of flexible spending accounts)?

How we can help

With a growing family, your goals and priorities can change quickly. Our unique approach to financial planning for new families is built to be flexible, evolving with your life. An Ameriprise financial advisor can meet with you regularly to help you stay on track as you plan for your future.