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Budgeting For a Family
If you’re expecting your first child, establishing a budget that includes your growing list of expenses is important for helping you manage your finances.
Starting a family is one of life’s most rewarding experiences. However, it will also profoundly impact your financial picture, with a list of expenses that grows by the year. (One estimate pegs the total expenses for a child’s first 17 years at $336,616.)1
As you begin planning for your first child, consider these key areas and their associated expenses.
Healthcare
One of the first steps you are likely to take prior to welcoming your child is to modify your healthcare plan to make sure that your baby is covered. You can choose a managed care plan, such as a health maintenance organization (HMO), which offers lower up-front costs but limits you to specific doctors and hospitals. A preferred provider organization (PPO) plan typically has higher monthly premiums than an HMO, but offers you the freedom to see any doctor or specialist—at any hospital—and often has lower co-pays than an HMO.
Deductibles, coinsurance amounts, copayments, and monthly premiums vary greatly. Review the options available to you carefully before making your selection.
For those expenses not covered by health insurance, consider a medical reimbursement account (MRA) or health savings account (HSA), if available from your employer. These can pay for items such as deductibles, copayments, and orthodontics.
Childcare
You may be eligible to receive tax benefits as a parent, with the Child Tax Credit providing a credit of up to $2,100 per child under age 17 (as of 2022)2. Part of the credit is refundable, which means that you could receive a tax refund (up to $1,400 per qualifying child) even if you don’t owe any tax.
To qualify, your child must have a Social Security number before you file your tax return.
Note that the credit is reduced for married taxpayers filing jointly if their adjusted gross income (AGI) exceeds $400,000, and for other taxpayers if their AGI exceeds $200,000.
Insurance
As you enter parenthood, consider the value of purchasing disability insurance or life insurance.
A financial professional may be able to provide guidance as to the recommended amounts of coverage for each. Some general guidelines include a disability policy that covers at least 60 percent of your income and a life insurance policy that equals 5 to 10 times your family’s annual income.
Check to see if your employer offers these policies because they are often less expensive than those that you purchase independently.
Estate Planning
Consider drawing up a will that designates a legal guardian for your child, in the event that you and your spouse die together (or if you are a single parent, if you should die). Without a will, if you and your spouse die together, a court will decide whom to appoint as your child’s guardian.
The will should apply to your future children, too.
By carefully budgeting for your baby, you can help secure the financial futures of both you and your child.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. This material was prepared by LPL Financial, LLC.
Member FINRA/SIPC
MC-1365950ART8-1222
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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Fibre Federal Credit Union and Fibre Financial Group are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Fibre Financial Group and may also be employees of Fibre Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Fibre Federal Credit Union or Fibre Financial Group. Securities and insurance offered through LPL or its affiliates are:
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