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Baby on Board: 3 Things to Consider When Your Family is Growing

Baby on Board: 3 Things to Consider When Your Family is Growing

July 27, 2020

I don’t think many people would dispute the fact that having a baby changes your life. The unexpected can and will happen – doing a little preparation can save you a lot of headaches down the line. Here's three things to consider if you have a growing family:

1. Emergency Fund

The first step new parents should take is to build an emergency fund (if you don’t already have one). According to a study conducted in November 2019 by GOBankingRates, 69% of Americans had less than $1000 in savings.

A significant portion of this group had no savings at all.


An emergency fund should have enough money to cover three months of expenses if your source(s) of income is cut off. The recent COVID-19 pandemic highlights the importance of an emergency fund more than ever. Many Americans lost their jobs and most likely had no savings to fall back on. Clearly, building your savings is important for everyone to do, not just new parents. When you add dependents to the mix, however, having savings to continue to support you family is arguably more crucial.

Other reasons to have an emergency fund than a pandemic include one or both of the earners in the household losing their job, medical bills, or any of the myriad unforeseeable life events.

2. 529 Plan

Think that college may be in the cards for your child? It’s never too early to start saving for their education. There are several ways to go about this, such as a 529 plan. Opening a 529 for your child is a simple and easy way to get started. Each state has its own plan with its respective tax advantages. As there are different options, it’s a good idea to consult with a financial advisor to determine what’s optimal for your individual situation.

The minimum investment for the New Mexico Scholar’s Edge 529 program is $1 – not a tricky sum to come up with regardless of your financial situation. These funds have the potential to grow tax-deferred and if you withdraw money to pay for qualified education expenses, it’s tax free. “Tax-free” is the unicorn of the investment world, but in this case, it really exists! Of course, you must ensure that you follow all the rules and regulations, but it is still a pretty sweet deal.

If they decide not to go to college, all is not lost! 529 funds can be used for more than the typical 4 year college. Most post-secondary education can be paid for with 529 funds. This includes vocational and trade schools and even some apprenticeships.

The beneficiary of the 529 can also be changed to another child or grandchild who may make more use of the funds. So, as you can see, the funds in the plan can be redirected if your child no longer wishes to attend college which makes them an attractive option.

3. Life Insurance

Children are expensive. If one parent passes away, the other will find themselves suddenly saddled with the responsibility of covering all of the expenses. You can help ensure, however, that your surviving family can continue to live comfortably. One option to explore is life insurance. Life insurance can be a great tool to support your family in the unfortunate event that you pass away.

The surviving parent may need or want to take time off of work – life insurance funds can give them some breathing room during one of the most difficult times in their lives. If the surviving parent was a stay-at-home parent, the funds could go towards education to reenter the workforce. Childcare costs are also bound to increase.

Even if the surviving parent can afford to meeting the basic needs of the family, you can choose to leave monies for something like your child’s education. Maybe you own a house which has a significant mortgage. The funds from a life insurance policy can help or completely pay off that liability.

As a single parent, you’ll want to provide for the event that you pass away. With life insurance, whomever is caring for your child can have sufficient resources to draw from.

A few other advantages of life insurance benefits is that you can generally expect the funds to be tax-free to the beneficiary and available relatively quickly. They’ll usually receive the death benefit without having to pay income tax on those funds and it won’t get stuck in probate. This is just one aspect that makes life insurance different from other sources of funds. If you save up 100k in a bank account and your family member receives it, they will have to pay all applicable taxes on that 100k.

Of course, each family's situation is unique and life insurance is merely one tool available. We recommend that you discuss your situation with a financial professional to determine the best path for you and your loved ones.

Sources Consulted:


Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing; specific plan information is available in each issuer's official statement, which can be obtained from your financial professional. Be sure to read carefully before investing.

There is the risk that investments may not perform well enough to cover college costs as anticipated. Also, before investing, consider whether your state offers any favorable state tax benefits for 529 plan participation, and whether these benefits are contingent on joining the in-state 529 plan. Other state benefits may include financial aid, scholarship funds, and protection from creditors.

This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.