USAA is a highly competitive financial services company known for its financial strength and outstanding service to its members. USAA owns or
manages assets of $83 billion, and provides insurance, banking, and
investment products to more than 5 million members of the U.S. military
and their families.
As waves of returning troops have set off a mini-baby boom throughout the military community, many service members will find themselves on diaper duty in the next year. While parents are rejoicing over their new arrivals, they also may be worrying about their financial security. After all, a U.S. Department of Agriculture survey found the average family will spend more than $13,000 on baby-related expenses in their child's first year.
Certified Financial PlannerTM practitioners from USAA offer these tips to help parents ensure their families stay fiscally fit for years to come:
Before the Baby Arrives
Create a "baby budget": Consider the new costs that a baby brings to the home, update your monthly budget to match, and immediately start living within those parameters.
Plan for unexpected expenses: Use any savings in your new budget to begin building an emergency fund of three to six months' living expenses.
Avoid health insurance headaches: Analyze your health insurance policy to determine what expenses are covered for mom and baby during the birth event. If you will owe a large deductible or know some costs won't be covered, you can start saving now.
No Down Payment
Your VA home loan benefit can make your dream of becoming a homeowner a
reality. Buy a new home with no down payment. With interest rates at record
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Take advantage of flexible spending accounts: Childhood illnesses are a part of having a new baby. If your employer offers a flexible spending account, enroll in the plan as soon as possible so you can pay for child care and medical expenses with pre-tax dollars.
Plan for time off: Ensure you understand your employers' maternity and paternity leave policies, and whether you will be paid if you take time off. If not, determine how your health insurance coverage and any employer-sponsored retirement plans will be maintained during this period.
Before the Baby's First Birthday
Review tax benefits: New provisions allow parents a tax savings of almost $1,800 as a result of having a new child, assuming a 25% tax bracket. According to the Internal Revenue Service, parents receive a $1,000 child tax credit and a $775 exemption for each child. Check out the IRS withholding calculator at www.irs.gov for more information on how to adjust your current withholdings.
Update important information: Make sure your new family member is added to your health insurance policy, and review other important documents, such as beneficiary information, for potential updates.
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Create a secure financial future: With a child depending on your income, it's wise to obtain life insurance. A financial planner or estate attorney can help you determine which type of plan and level of coverage is best for your needs. Also consider purchasing supplemental disability insurance to guarantee income for a larger family.
Prepare your estate: Protect your new family by updating your wills to include who will serve as your child's guardian if the need arises. Depending on your situation, you might want to consider setting up a trust to ensure your property is given to your child according to your wishes.
Save early for college: Due to the benefits of compounding interest, parents who start investing when their child is born have a much better chance of covering the escalating costs of college. Investing in tax-advantaged plans like state-sponsored 529 College Savings Plans or Coverdell Education Savings Accounts (CESAs) can help you make the most of your money.
USAA is a diversified insurance and financial services organization that has served the military community since 1922.
