Planning for a new child is so exciting! But as parents, we know it can also start to feel overwhelming. With so many things to think about like doctor appointments, nursery setup, and baby registries, the financial and legal to-dos tend to fall through the cracks. Plus, especially if this is your first kid, you may not even know what you need to be doing protect your growing family!

That’s where our New Child Checklist comes in.

Common New Child Planning Questions We Answer:

• What financial changes do I make when having a baby?
• How much should my emergency fund be with a new child?
• Should I get insurance now that I’m having a baby?
• Do I need to make beneficiary updates now with a new baby?

What’s Inside the New Child Checklist:

This free downloadable resource walks you through the financial and legal to-dos so nothing falls through the cracks:

• Cash flow adjustments – Budget for income changes and consider reevaluate your emergency fund
• Insurance updates – Add your child to health insurance within 30-60 days, and review life and disability coverage
• Estate planning essentials – Update beneficiary designations, wills, and trusts to protect your child’s future
• Tax planning considerations – Consider how your new addition affects your tax situation and withholdings

Download our New Child Checklist today for more guidance to protect your growing family with confidence.

Ready to dive deeper? Explore our “Are You on Track to Be a Millionaire?” resource to find out what you already need to have saved to make your kid a millionaire, and watch this full episode: 3 Ways to Make Your Kid a Multi-Millionaire.

If you are Financial Mutants with kids, you might be wondering exactly what you can do to set them up for a great financial future. If you’ve already saved for their college and helped them start retirement accounts, where do you go from there? How much help is too much help?

Want to know what to do with your next dollar? You need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.

When it comes to saving for your children, what should you think about when deciding between a taxable brokerage account and an UTMA?

In this highlight, we discuss how to set yourself up for financial success when you are in the messy middle and growing your family. Want to know what to do with your next dollar? You need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.

In this highlight, Bo and Brian discuss weather a 529 or index funds is better for saving money for your child’s future college expenses.

Looking for a money multiplier calculator? Check out our Money Guy Wealth Multiplier to help ensure they that become a millionaire by 65!

It’s important to focus on the fundamental concepts of saving and investing to help them establish healthy money habits from an early age.

• Generosity – Teach them about the importance of the abundance cycle and being generous with their money.
• Saving – Highlight the concept of spending less than you earn and the power of delayed gratification. Consider your own dollar for dollar matching program to give them an extra incentive to save!
• The Power of Compounding Interest (Time) – Consider opening a Custodial Brokerage account or a Custodial Roth IRA (if they have earned income) so that they can experience the magic of compounding interest, first-hand. Make sure they understand the amazing opportunity they have as young savers with the Wealth Multiplier By Age (free download), showing how much their dollars can grow from ages 0 to 65.

Check out the video below if you want to learn how to make your children millionaires!

Before making any decisions about your future plan, it may be worth sitting down to think about what you envision for your kids – pre-paid education, a house/car down payment, retirement savings, disability needs funding, etc.

Each of these goals has a different strategy, as discussed below. If you have several goals in mind, one important thing to consider is that you do not have to pick one single option and can utilize a combination of planning strategies.

We like to compare saving for your children to an oxygen mask when you are on an airplane. It is important to save for yourself first (Check out the Financial Order of Operations). Your children can always take out loans for school or save for themselves, but you cannot take out loans to fund your retirement later on. Just remember, you are actually doing them a favor this way because you will not end up living in their basement one day.

Education

There are a few tax-advantaged ways to save for your child’s education. The most popular option today is a 529 plan, which allows tax-deferred savings to be invested and used tax-free toward qualified education expenses (i.e., K-12 tuition, college tuition, room & board, books, laptops, etc.). Some states even allow a state income tax deduction for contributions to their 529 plan. Anyone can open a 529 for a beneficiary, including family friends or grandparents. For parents wanting to save for a child before they arrive, they can even open an account naming themselves as beneficiary and then update that to name their child later. If a 529 is not needed (received scholarship, did not attend college, etc.), the account beneficiary can be renamed to a qualified beneficiary. When picking where to establish a 529 plan, it is important to consider your home state’s tax advantages and the investment options (and their costs) available within the plan.

There are a few downsides to saving to a 529 plan. Tax-free withdrawals are subject to qualified withdrawal rules, which do not include travel expenses, extracurricular activities, or health insurance. Also, for those who are taking advantage of the American Opportunity Credit, you cannot “double dip” to take the tax deduction for expenses paid from a 529. Finally, if you have unused 529 funds (received scholarship, did not attend college, etc.), and you need to withdraw the savings, the earnings portion of your non-qualified withdrawal would be taxed as income, along with a potential 10% penalty (depending on your situation).

Because of the limitations of the 529 plan, some parents find that they prefer to save for college within a brokerage account, whether it be their own or a custodial account. While brokerage assets are not tax-advantaged, they are accessible at any time, and are not penalized if not used for qualified education. The downside to using brokerage assets as a savings vehicle for education is that when it comes time to file a FAFSA and qualify for financial aid, a higher proportion of the assets are included as available for education spending.

Video: The Best Ways to Save and Pay For College

Personal Goals

For more personal goals (future cars, weddings, home down payments, etc.), you may want to consider a custodial account. Custodial accounts, such as UTMAs and UGMAs, allow you to act as custodian of a brokerage account/after-tax assets for a minor child. The difference between UTMAs and UGMAs lies in what investments are available – UGMAs can hold traditional investments (cash, stocks, bonds, etc.), and UTMAs can hold traditional investments, along with real estate. Both accounts are easily accessible to investors and provide a lot of investment flexibility because there are no qualifying rules for contributions or withdrawals like there are on other accounts. Accounts can be opened at banks (similar to a savings account), but brokerage institutions, such as Schwab, Fidelity, or Vanguard, may allow you to grow savings for longer-term goals.

There are a couple things to think about when investing a custodial account. First, the account legally becomes the child’s asset once they hit the “age of majority”, usually 18 or 21 (state-specific law). Second, if income is high within the account, it could be subject to Kiddie Taxes, which are higher than standard tax rates.

Retirement

It is no secret that The Money Guy team LOVES Roth assets, so we love the use of Custodial Roth IRAs when possible. Contributions are taxed before they are invested, but continue to grow tax-free until retirement. Having the opportunity to take advantage of so much tax-free, compounding growth can be a game-changer for your children. If you think 88x over is impressive, check out this resource that shows the power of compounding growth for kids. One strategy Brian likes to use to incentivize saving is a dollar-for-dollar match with his daughter. For every dollar his daughter saves, Brian also invests a dollar (up to the eligibility limit).

To qualify for Custodial Roth IRA contributions, children must have taxable, earned income. For example, an earned paycheck from working as a lifeguard would count, but non-taxed cash earned from chores would not.

Keep in mind that Roth IRAs are intended for long-term saving and investing. If you are saving for a specific need pre-retirement, you may want to revisit your options to ensure you will have full access to your savings.

Disability Savings

If your family needs require saving for a child’s disability, you may want to investigate an ABLE account. ABLE accounts are intended for the Maintenance, Health, Education & Support of those with disabilities. If eligible, an individual can have one account (tied to their SSN) opened through a state. Contributions are limited to $15,000 annually from outside sources, but can grow tax-free if used for their intended purpose. A beneficiary with earned income can save their earned income to the account, as well.

If someone eligible for the ABLE was the beneficiary of a 529 account (intended for education expenses), and that account is no longer advantageous, 529 assets can be rolled into the ABLE. Also, ABLE accounts do not disqualify beneficiaries from governmental programs such as Medicaid and SSI. To qualify, a person must be diagnosed with a disability before age 26.

Check out Brian & Bo’s thoughts!

Video: How to Be Young Money Millionaires! (By Age)

Video: What are the Best Ways to Save Money for Kids?

There are so many different options out there when it comes to saving money for your children. In this highlight, we discuss some of our favorite ways to save for kids and explain the differences.