A newborn baby is a wonderful blessing that can blissfully turn your life upside-down. But with all the excitement come responsibilities. Life insurance, education funding, your estate even your retirement -- which may seem to be in the far distance -- all take on a new urgency. Not only will you need to give your child security and protection through your love but also with a strong and effective financial plan.
You've just made a significant lifestyle change and it’s vital to keep up with the healthcare and insurance needs that come with it.
Medical benefits and Health Care
Now would be a good time to once again look at the terms and benefits offered by your medical aid scheme and also to make sure the newest addition to your family is listed as a beneficiary. Establish if your current medical scheme provides you with all the cover you may require, or if you need to make provision for a shortfall.
If you do not already have life insurance, now is definitely the time to put some in place. Even if you do have existing life cover, it is still a good time to reassess it so you can be sure it meets the requirements of your changed lifestyle. Get your qualified financial adviser to conduct a complete financial analysis.
Also see: Who should have life insurance?
If something unexpected were to happen to you or your spouse, would your child have adequate financial support for years to come, even through university?
Review your disability cover. If you become disabled and unable to work, due to illness or accident, will you be able to cope with the financial impact on you and your family?
Estate Planning & Trusts
With a new baby, it is important for both parents to have up-to-date wills. You’ll need to decide on and designate a legal guardian – a person you both choose to raise your child in the event of an unexpected tragedy.
You may also wish to set up a trust for your child and name trustees separate from your chosen guardian. Through a trust, you can ensure your estate is paid out to your child according to your wishes. Among other things, trusts can be used to:
- Shield assets from potential creditors
- Preserve assets for minor children until they are of age
- Create a pool of investments that can be managed by professional money managers, known as trustees
Trusts can be very useful financial tools and you should discuss their pros and cons with an accredited financial adviser. But keep in mind, they can be expensive to set up and maintain and there are some other disadvantages that may affect you, as well.
Saving For Education
It may seem as if you have plenty of time before you’ll need to think about paying for university. But there’s no better time to start saving than now. With the rising cost of education, by the time your baby is ready for university, the annual price of a good bachelor's degree will be three times what it is today. If you start planning and providing now and contribute regularly, you'll be making a huge investment in your child’s future.
Click here to learn more about providing for your child's education.
Raising a child can be expensive but with smart planning and the right adjustments to your financial plan you can confidently provide your child with a strong foundation and a bright future.