In the 4 months that we’ve had our baby, my husband and I have found ourselves taking a lot of steps already in researching and preparing him finance-wise for the world. I’ve was surprised at how much there was to consider. Maybe we’re jumping the gun, but in case it’s useful, I thought I’d document what we’ve done so far for our son:
1. Got certified copies of his birth certificate – If you give birth in a hospital, chances are they’ll provide you all the paperwork and submit the necessary forms for your baby to be registered at your local county. In our case, this took minimal effort (short of finally deciding on our baby’s name, which we did the morning before we were discharged). Copies of birth certificates were ready about 2 weeks later, and we needed them in order to get his passports (see below).
2. Got his Social Security Number/Card – As if to confirm his official existence, the first piece of mail our son ever received was his social security card. In our case, the forms to submit for that were also done at the hospital along with those for the birth certificate.
3. Got his health insurance card – Don’t forget to add your new baby to your insurance plan to make sure s/he’s covered. We’re in the US, meaning our insurance is provided by an employer (mine). Considered a “change of status event”, you usually have 30 days from the date of the qualifying event (e.g. the baby’s birth) to add a new dependent. This was the second piece of mail our baby ever received. Not sure what this says about modern life!
We also increased our flexible savings account or FSA amount for this year knowing our costs and copays would increase due to the delivery, pediatric visits, and so on. FSAs allow you to take pre-tax dollars from your paycheck and put them toward medical and other related costs, thereby decreasing your income tax basis; however, you have to estimate how much you’ll use during the year, or else you’ll end up losing any unused funds.
4. Got his passports and registered him for citizenship in the countries he qualifies for – We went ahead and got a US passport for our baby at about 6 weeks of age. (See my post on how to take a baby’s passport picture for more details). Part of this was because we knew we would likely be taking a trip to Spain so that he could meet his grandmother, but my husband also thought it wise to go ahead and get our baby boy registered in Spain and the Dominican Republic as well, additional countries for which he qualifies to be a citizen. You might think this step unusual or unnecessary, but with globalization being the norm, having access to jobs (in the future) and health care in the EU or other parts of the world are a hedge against uncertainty. I have to admit that getting him registered in non-US countries was a lot harder (read: more bureaucratic) but still worth the effort.
5. Updated him as a beneficiary in our accounts – It’s always good to have your wills and various accounts (brokerage, 401k, IRAs, etc.) updated in case something unforeseen should happen to you or your partner/spouse. I’m still in the midst of researching and actually making changes or creating a new will as part of our “estate planning” (not that we have anything close to an “estate”). Keep in mind also that in some cases, if a minor becomes a beneficiary for an account, a custodial account for the minor must be created. Depending on the state you live in, the Uniform Transfers to Minors Act (UTMA) is the act that determines when funds are turned over to minors (usually at 18 or 21 years of age). My husband doesn’t think that’s really old enough to hand over a chunk of money to a young adult (he pictures our son spending money on a Ferrari), so the possibility of creating a living trust instead is something I’m now looking into.
6. Looking into education savings plans – 529 plans, Coverdell Educational Savings Accounts, plus many other possibilities abound here. These didn’t exist when I was growing up, but the first two are tax-advantaged accounts that you can set up for college or secondary school (depending on which vehicle you choose).
I’ve only just started looking at these, and for the 529 plans at least, the choices are mind-boggling. Each state has one or more different plans, with different contribution or value limits, different management fees/expenses, different restrictions (some are for state residents only), different investment options, and different tax benefits. Because we happen to live in California, which does not currently offer a state income tax deduction for contributing to a 529 plan, I’ve narrowed it down to looking at six or so 529 plans in other states. I’ll post more on these as I figure out what to do, but a good website to start with is Savingforcollege.com, which will give you a list of options and recommendations depending on the state you live in and any tax advantages that you might receive. A nice tool given the sheer number of 529 plans out there.
For better or worse, it seems being a responsible parent these days means starting early by taking a bunch of practical steps toward planning for your children’s future. Part of me wishes this wasn’t necessary and that spending all my time loving, hugging and playing with my baby was sufficient to ensure a great future for him. After all, that’s a lot more fun than planning for college costs, beneficiary changes, and the unknown. Money will never replace love, but I’m hoping that once we complete these steps our baby’s future will be better and easier.