Whether you’re expecting, adopting, recently had a baby or are simply exploring the possibility of parenthood, welcoming a baby into your family is exciting and life-changing!
Beyond the joy of choosing names and decorating the nursery, parenthood involves many important decisions that will shape your family’s future. While emotional and logistical preparations are essential, practical steps like adjusting your budget, updating insurance, and reviewing your estate plan can help build a secure foundation for your child. Here are a few key considerations to keep in mind as you embark on this happy new chapter.
Reviewing your budget and emergency fund is crucial as you prepare for the financial responsibilities of parenthood. Adjusting and accounting for new recurring expenses—such as childcare, diapers, formula, and medical costs—can help you manage day-to-day spending more effectively. It’s also wise to increase your emergency savings to cover at least 3–6 months of expenses, providing a financial cushion for unexpected situations. To stay on top of these changes, consider using budgeting tools or apps to track spending and to help ensure you’re maintaining financial stability as your family grows.
Childcare costs can put a significant strain on family finances, but several tax benefits can help ease the burden. Understanding these options allows parents to make informed decisions and maximize available savings, helping to create greater financial stability for their families.
Check to see if your employer offers a Dependent Care Flexible Spending Account (DCFSA). In 2025, households can contribute up to $5,000 for eligible childcare expenses.[1] This pre-tax deduction lowers taxable income, helping to reduce overall tax liability. For those who are married and file separately, the contribution limit is $2,500 per person. Like other FSAs, any unused funds will be forfeited at the end of the year.
Parents should update their W-4 form when they have a new child to help ensure accurate tax withholding throughout the year. Some families may qualify for the Child and Dependent Care Tax Credit, which covers a percentage of eligible expenses such as daycare, pre-school, and after-school care. In addition, the 2025 Child Tax Credit offers up to a $2,000 credit ($1,700 refundable) per child under 17, though it phases out at higher income levels[2]. Because the rules can be complex and the best choice depends on your financial situation, it’s wise to consult a tax professional and your financial advisor to review your tax savings options.
There are several ways to save for your child’s future, but two common options are 529 plans and custodial accounts (Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts). A 529 plan offers tax advantages and is specifically designed for education-related expenses, making it a great long-term savings tool. If you prefer more flexibility, custodial accounts (UGMA/UTMA) allow for broader use of funds beyond education. Regardless of which savings option you choose, starting early is key—small, consistent contributions can grow significantly over time, helping to build a strong financial foundation for your child. For more information on education savings, read Education Savings: There’s No Time Like the Present.
Under most employer-sponsored and marketplace health insurance plans, you typically have a 30-60 day (post-birth) special enrollment period to add your newborn to your health insurance plan. Before your baby arrives, it’s wise to explore and compare available plans to determine whether a different option might better suit your growing family or offer stronger pediatric coverage. Depending on your plan, you may also need to budget for increased premiums, co-pays and out-of-pocket medical expenses.
Choosing the right life insurance can be overwhelming, but it is a crucial component of a well-rounded financial plan. Not only does it provide financial protection for beneficiaries in the event of the insured’s death, but depending on the plan, it may offer potential tax advantages down the road. Adequate life insurance coverage can help pay off a mortgage, fund future education needs, and cover daily living expenses for loved ones left behind. With the addition of a baby, the financial needs of your family now and in the future must be taken into consideration when selecting coverage.
If you have life insurance offered through your employer, you can consider buying supplemental insurance through that plan, if that’s an option. Otherwise, you may need to consider getting a secondary life insurance policy. The coverage you need depends on your family circumstances and financial goals. Your financial advisor can help you determine what coverage amount is best for your situation, review your employer sponsored policies (including disability insurance), and meet with you and an outside insurance professional to discuss purchasing other insurance, such as term life insurance, if necessary.
Ensuring your child’s future financial security requires careful estate planning. Naming a legal guardian in your will is essential, as it allows you to designate who will care for your child if you are unable to do so. Additionally, setting up or revising your will or trust helps ensure your child is appropriately cared for and your assets are properly distributed. It’s also important to create or update powers of attorney and health care directives to cover financial and medical decisions. Consulting with an attorney can help you navigate these steps and will help make certain your estate plan is comprehensive and aligns with your long-term goals. An attorney can also guide you in determining whether establishing a trust makes sense for your specific situation.
As your family grows, it’s important to review your beneficiary designations so they reflect your current circumstances. If you have a spouse listed as the primary beneficiary, you may want to designate your child as a contingent beneficiary, provided you’ve arranged for the proceeds to be properly managed until they reach adulthood. Regardless of whether you’re a single parent or in a two-parent household, setting up a trust can be a valuable strategy for safeguarding your child’s financial future. By naming the trust as the beneficiary, you can appoint a trustee to oversee the funds for your child’s benefit and specify how and when they should be distributed. Another option is establishing a Uniform Transfer to Minors (UTMA) account, where a designated custodian manages the assets until your child reaches adulthood.
Birth registry is the process of officially logging your child’s birth with the government. Hospitals typically handle the initial birth registration process and send the information to the state health department. In most cases, a birth certificate (the official document that confirms the birth/filing) is available a few weeks after the baby is born.
It is imperative that your child have a Social Security Number (SSN) before filing your taxes. This is usually applied for at the same time you register the baby’s birth at the hospital. If your child is coming to you via adoption, it is best to wait until the adoption is finalized to apply for an SSN to ensure your child has your name. If you want to claim your child for tax purposes while the adoption is still pending, you will need to fill out an Application for Taxpayer Identification Number for Pending U.S. Adoptions.
Every child, including newborns, must have a passport for international travel. Since processing can take several weeks, it’s best to apply early. Both parents need to be present when submitting the application, which requires a completed Form DS-11, the baby’s birth certificate, and passport photos.
Bringing a child into your life is a joyful and transformative experience, but it also comes with new financial and logistical responsibilities. Taking proactive steps—like adjusting your budget, securing insurance, updating legal documents, and saving for your child’s future—can help create a stable foundation for your growing family. With thoughtful preparation, you’ll be well-equipped to navigate the journey ahead. Reach out if we can help you prepare for your new arrival. We are here to support you during this very special time.
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