Consider these key actions to take after welcoming a child into your family.
Welcoming a newborn child into your family is a special and momentous time in your life. But it can also be an overwhelming new chapter, as you balance the intense demands of childcare with newfound parental responsibilities, both financial and personal.
We are here to help you think through the financial steps to take before and after the birth or adoption of a child — while also keeping you on track to your long-term financial goals.
Here are the key financial actions to take as a new parent:
In this article:
- Finalize your new budget
- Make sure your health insurance works for your family
- Consider an FSA for childcare costs
- Ensure you’re protected from unexpected events
- Create or update your estate plan
- Start saving for your child’s future
- Utilize tax credits when it’s time to file
- Think about how you want to pass on your financial values
- Questions to discuss with us
1. Finalize your new budget
As your family grows, your expenses will grow too. Consider how new expenses may impact your bottom line, and make sure to incorporate them into your ongoing budget. For example, you may need to spend more on groceries, clothing and other household items. Or you may find your take-home pay to be lower because your health insurance premiums are larger with a family plan. Further, childcare can be a significant expense for new parents and can temporarily impact savings rates and discretionary spending.
2. Make sure your health insurance works for your family
You usually have 30 to 60 days after the birth or adoption date to add your child to your health insurance policy, although this window will vary depending on the employer and insurer. Make sure you add your child to your policy (or your partner’s) as soon as possible so there isn’t a gap in coverage for your child.
Since the birth or adoption of a child is a qualifying life event — which means you can modify your coverage even though it’s outside of the typical open enrollment period — use this opportunity to reevaluate your medical insurance more holistically and make any necessary adjustments. For example, you may want to increase your contributions to your health savings account (HSA) or switch from a high-deductible health plan to a low-deductible one (or vice versa).
3. Consider an FSA for childcare costs
If you plan to pay for childcare, consider a dependent care flexible spending account (FSA), if available through your employer. With a dependent care FSA, you can automatically transfer pre-tax dollars from your paycheck into an account that can then be used to pay for qualified out-of-pocket dependent care expenses. All in all, a dependent care FSA can help you systematically save for childcare costs in a tax-efficient manner. However, annual contributions to these accounts are capped at $5,000 annually per married couple for 2025 (increasing to $7,500 for 2026), and they don’t roll over to the next year, so if you expect yearly costs to exceed that amount, consider how to budget for the rest of your childcare expenses.
4. Ensure you’re protected from unexpected events
The arrival of a new child is also a good time to review your insurance needs and determine if you should increase your coverage. For example, you may want to buy or increase your life insurance coverage to help protect your family’s financial well-being should something happen to you or your partner. Death benefits can be used to pay off debts, support your child, replace your income or fund future expenses like college. Similarly, it’s wise to consider disability income insurance to help protect your earned income in the event an illness or injury prevents you from working. And if one parent decides to stay at home to care for the children, it’s wise to think about replacing any life and disability coverage they previously had through their employer.
5. Create or update your estate plan
The birth or adoption of a child is a significant life event that warrants a review of your estate plan. If you don’t yet have a will, you’ll want to create one. If you already have a will, update it to designate a guardian to care for your child in the event of your passing and to specify how and when your assets are distributed. Similarly, review and update your beneficiaries on your financial accounts to ensure they reflect your current wishes.
Learn more: Getting started on estate planning: Key actions to take
6. Start saving for your child’s future
Reflect on your financial priorities for your child. If saving for your child’s education is a goal, then you’ll want to start thinking about how much you’ll want to save and the different investing options, like a 529 plan, that are available to your family. Beyond education, there are also other ways to save for your child’s future, such as through Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) custodial accounts. Whatever your goal is, the earlier you begin, the longer the investment time horizon.
7. Utilize tax credits when it’s time to file
When tax season comes around, you may be able to offset some child expenses by taking advantage of any available tax credits. Consider the following tax breaks:
- Child tax credit: You can claim up to $2,200 per child under 17 in 2025.
- Child and dependent care tax credit: Taxpayers who pay for childcare or dependent care so that they can work are potentially eligible for this tax credit. The credit generally covers up to 35% of qualifying expenses, up to a maximum of $3,000 of expenses for one qualifying individual or $6,000 for two or more qualifying individuals, for a maximum credit of $1,050 or $2,100 respectively. However, limitations apply with this credit, and may be affected by contributing to a dependent care FSA.
8. Think about how you want to pass on your financial values
It may seem early, but start thinking about the type of relationship you want your child to have with money. Is frugality a financial value you’d like to model for them? Do you want to them to understand the importance of saving and charitable giving? Consider what financial lessons you’d like to pass on and then take small steps to educate and reinforce those values as your child grows.
Learn more: Financial literacy for kids: How to teach kids about money
We’re here to support you and your growing family
As your family grows, we are here to help you evolve your financial strategy accordingly, while keeping you on track to longer-term goals like retirement.