In addition to the kinds of things that make up baby registries and line the closets and walls of nurseries, there are some must-have items that every new parent should consider. Regardless of your income level and budget, it will really pay off to plan ahead. In addition to the tips provided in our first article, here are some added items to consider.
Start a Savings Account for Your Child
If you desire to save money for your child’s college fund, you need to start now. If you don’t include it in the budget before diapers and Little League and increased auto insurance fees start eating away at your monthly funds, you probably never will. You may want to consult a financial advisor to figure out what makes sense with your family’s finances.
One type of college savings plan is a 529 plan. While contributions to a 529 plan are considered taxable income, these plans can grow and be taken out to pay for college without being subject to federal taxes. Additional cash-back programs such as Ebates can help you set aside some extra money for a single child’s college fund, as well.
Open a Life Insurance Policy for Your Child
You may also want to look into purchasing a small Whole Life Insurance policy for your child. Not only does this kind of plan allow for funeral expenses, should your child precede you in death, but they can also provide a tax-sheltered means of savings, for your child. Many of these can transform into tax-free savings.
They also typically come with guaranteed purchase potential, making sure your child can continue to get health insurance as an adult, regardless of any health problems that would otherwise be classified as preexisting conditions and therefore outside the boundaries of any health insurance they would be eligible for as an adult; however, the Affordable Care Act and its efforts to make health insurance available for all regardless of preexisting conditions apparently lessens the value of this particular benefit.
Look into a Dependent Care FSA
Many employers have various types of FSAs, or flexible spending arrangements. These tax-advantaged financial accounts allow employees to set aside pre-arranged portions of their earnings for a specific purpose. The most common type of FSA is for medical expenses, but dependent care FSAs are on the rise. Because this amount is deducted from earnings, it is not subjected to payroll taxes, allowing you to save money.
To take advantage of a Dependent Care FSA, you’ll need to carefully determine how much you will be spending in childcare expenses in a given year and have that amount withheld from the paycheck of the spouse whose paycheck lies in the higher tax bracket before that year begins. While FSAs once carried a “use-it-or-lose-it” risk, under the Affordable Care Act, the plan may now permit employees to carry over up to $500 into the next year (however, this is subject to change).
As you decorate that nursery and go shopping for cute baby clothes, make sure to take time before your baby comes to think about your — and their — financial future.
The Nicholas Insurance Agency, led by Greg Nicholas, is a family owned business serving the York county, Pennsylvania region. In the insurance business since 1981, Greg Nicholas helps families, businesses and individuals understand the value of different insurance products and make wise decisions when selecting the best insurance products for their specific situations.
Offering exclusively Allstate insurance products, the Nicholas Agency provides auto, homeowners, rental and landlord insurance as well as life & disability, recreational vehicle, motorcycle and personal liability insurance.
For more information, visit our two York, PA locations at Westgate Plaza or Northeast Shopping Center or call us at (717) 764-2024.
Image credits: Top © Andres Rodriguez/Fotolia; 2nd © kovalvs/Fotolia; 3rd © Spotmatik/Fotolia.