New Parents: Here Are Your First Two Money Moves When Baby Arrives

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I’ll never forget holding my infant son in my arms and rocking him back to sleep in the middle of the night by the fireplace. In that moment, life stood still for me.

Whenever I think of those early days, that wonderful memory of holding my tiny boy comes back to me as if it were yesterday, even though it was 28 years ago.

Your life will change a lot in your first year as a parent. As with most life milestones, there are a couple of very important financial moves to make during that time.

Before you do anything else, such as starting a college fund, make sure to put some protections in place for you and your spouse, the family’s breadwinners.

1. Review your life insurance policies to make sure you have adequate coverage.

If you’re not sure how much you need, you can run a life insurance needs analysis yourself or talk with an insurance agent to determine the amount based on your income, assets, and future needs and goals. Go to LifeHappens.org for a needs-analysis calculator.

Another way to determine the amount of coverage you want is your “human life value.” Obviously, you are more than just your salary, so the term may seem odd, but the calculation can be helpful.

This formula takes into account the amount of your future earnings, your tax bracket, life insurance already in force, and how much you have already saved. Check out a human life value calculator here.

Take an inventory of how much life insurance you have individually and in your group policy at work, if applicable. Then fill the gap between that and what you calculated. You may be able to increase your group term coverage at work, because having a baby counts as a life event. This may allow you to make a change in your benefits during the year, instead of having to wait until open enrollment.

2. Protect your income with disability insurance.

If you ever get sick or hurt, your family may still need your income. Don’t count on qualifying for Social Security disability insurance, as the requirements are steep: You have to be severely disabled, and must be unable to work for a year or have a condition that will likely be fatal.

Instead, find out if you have a group disability plan through your employer and/or look into an individual disability policy. After a waiting period (depending on your plan it could be 30-90 days), benefits start if your injury or illness leaves you unable to do your job.

Check the definition of disability on your policy. It could be defined as not being able to fulfill the duties of your “own occupation” (best) or “any occupation” (not as good). Some policies will pay a benefit if you can’t do your particular job for a certain time period, such as two years, and then the definition switches to “any occupation.”

The longer the benefit period, the better the policy. A great policy will pay a disability benefit for many years, up to age 65, and a basic policy will pay a benefit for at least two years, as long as you are disabled for that whole period.

If you don’t have any disability insurance, your family would need to scramble to make up for your lost income if you had to stop working.

You don’t have to do it alone. Get some help from an experienced insurance agent or Certified Financial Planner™ Professional to point you in the right direction.

So before you start funding college for your little one and planning all kinds of great vacations and adventures to show them the wonders of the world, get protected.

Late at night, when you wake up to feed your little boy or girl, wrap them up, hold them tight, and rock them gently until they fall back asleep in your arms. Savor that moment, because if you are like me, you’ll remember it fondly for the rest of your life.

This post appeared first on Forbes.com under the title, New Parents: 2 Crucial Money Moves To Make Within Your Baby’s First Year

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