Starting a family is an exciting life change for new parents. While caring for a child involves lots of feeding, diapering and nurturing, there are essential financial and legal issues to address.

This post will cover 10 financial things new parents should know. You’ll learn how to reduce risk with insurance, make doctor visits and childcare more affordable, get a head start on college expenses and protect your child’s financial future.

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1. You must add your child to your health insurance

Once your child is born, or adoption is final, you have 60 days to add the newest member of your family to your health plan. If you miss the deadline, you’ll have to wait until the next open enrollment to get your child insured.

So, contact your employer’s benefits administrator to find out what paperwork to complete. And if you don’t have a job with health insurance or are self-employed, contact your existing health plan or shop and compare options at Healthcare.gov or your state marketplace.

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2. You need life insurance

Life insurance protects people who depend on you for financial support, such as a spouse, aging parents and your new child. When you die, your beneficiaries receive a lump-sum payment, known as a death benefit. They can spend it on anything they like, such as a mortgage, rent, auto loan, childcare, education or funeral expenses.

If you’re worried that life insurance is expensive, you shouldn’t be. Studies have shown that consumers overestimate the cost of life insurance by as much as three times!

Studies have shown that consumers overestimate the cost of life insurance by as much as three times!

So, it might surprise you that if you’re in your 30s or 40s with relatively good health, you can get an affordable policy. For instance, a 20-year term life policy that pays $500,000 may cost less than $30 per month or $360 per year.

To know how much life insurance you need, consider answers to the following questions:

• What assets do you own (such as bank savings, investments, and real estate) that could get liquidated to cover expenses?
• How much debt do you have?
• How much annual income would your surviving family members need, and for how many years?
• What are your estimated funeral costs? (A traditional funeral can cost more than $10,000.)

It’s worth noting that if you have a child with special needs, you may need a permanent life policy, which covers you no matter when you die. That’s different from a term life policy that covers you for a set period, such as 10 or 20 years. There are a number of sites where you can shop and compare life insurance offers from various companies, including QuickQuote.com.

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3. You shouldn’t skip disability insurance

Are you aware that you’re more likely to suffer a disability than die before age 65? And long-term disabilities result in an average absence from work of 2.5 years, which is a long time to be without an income.

The best way to protect your income and prevent a strain on your family finances is to have a disability policy. It’s essential for every breadwinner because Social Security only pays after you’ve been out of work for a year and suffer a total disability. And worker’s compensation insurance may only be available if you get injured on the job.

It’s also important to remember that while health insurance covers a portion of your medical bills, it doesn’t pay ongoing living expenses if you can’t work. Disability insurance pays a part of your income, such as 60% to 70%.

You may get disability insurance through your employer. However, if you don’t have benefits at work or are self-employed, shop and compare coverage at Metlife.com or through a disability insurance broker.

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4. You need a healthy emergency fund

Unexpected financial challenges, such as a car breakdown or loss of income, are part of life. Having an emergency fund is essential for managing them without going into debt.

I recommend keeping three to six months’ worth of emergency savings in an FDIC-insured bank account. Even though you won’t earn much interest in your emergency savings, that’s not the goal. Always keep your emergency money safe and liquid. Never invest it because the value could plummet when you need it most.

Always keep your emergency money safe and liquid. Never invest it because the value could plummet when you need it most.

To determine how much emergency savings you need, first add up your monthly living expenses, including housing, utilities, insurance, groceries, loan payments and transportation. Then multiply it by how many months you could need your emergency cash.

If your job isn’t stable or you’re planning to finance a large purchase, such as a new home, car or college education, you may need to add 10% to your emergency cash estimate. Even though it may take years to accumulate enough emergency money, commit to getting started slowly.

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5. You must update your financial account beneficiaries

Whenever you have a life change, such as a birth, death, marriage, or divorce, review the beneficiaries on accounts, such as banks, retirement accounts, life insurance, health savings accounts, 529 college savings plans, brokerages and cryptocurrency exchanges.

Most parents name their spouse as the primary beneficiary and children as secondary beneficiaries. However, since minor children can’t take ownership of assets until they reach the age of majority in your state, be sure to appoint a trusted guardian.

Another option is to set up a trust, which allows you to communicate how you want money for your heirs to be managed. Get advice from an estate attorney to understand the best way to protect your children after your death

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6. You need to create emergency documents

When you become a parent, you should create or update your emergency documents. They include your:

• Last will
• Living will
• Health care proxy
• Power of attorney

Your last will explains your wishes and where your assets should go when you die. As I mentioned, it’s also critical to name a guardian for any minor children.

Additionally, make sure you and your spouse have a living will, health care proxy and power of attorney in place to keep your family safe in the event of a medical emergency or other hardship. Check out standard legal forms at LegalZoom.com or speak with an estate attorney who can help you create the emergency documents you and your family should have.

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7. You should consider using an FSA when available

A flexible spending account or FSA is a tax-advantaged saving plan offered by some employers. Your contributions must come from payroll deductions and are never taxed if you spend them on qualified medical and childcare expenses.

An FSA is a “use-it-or-lose-it” plan, which means there’s an annual spending deadline. You must empty the account each year or carry over a small amount, such as $500.

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8. You should open an HSA when possible

A health savings account or HSA is another tax-advantaged medical savings account you can fund if you have an HSA-eligible health plan. Like an FSA, it allows you to pay for various healthcare expenses on a pre-tax basis, which can result in a 20% to 30% discount depending on your income tax rate. Unlike an FSA, your HSA has no spending deadlines, allowing funds to roll over each year without penalty.

An HSA stays with you if you change jobs or become unemployed. Even if you lose your HSA-eligible health insurance, you can continue spending your HSA balance. However, you won’t be eligible to make new contributions.

Once you turn 65, you can even spend an HSA on non-healthcare expenses, making it a great way to build wealth for retirement.

Once you turn 65, you can even spend an HSA on non-healthcare expenses, making it a great way to build wealth for retirement. However, you shouldn’t put money in an HSA that you might need before retirement. Taking money out for non-qualified expenses means you must pay income tax on withdrawals plus a 20% penalty.

HSA contributions are deductible on your tax return even if you don’t itemize. You can typically invest your balance in a menu of options, such as mutual funds.

In some cases, you can have both an HSA and an FSA. For instance, a Limited Expense FSA allows you to save for certain costs, such as dental, preventative care, and vision expenses. There’s also a DC-FSA designated for childcare expenses, including daycare, preschool, and after-school programs.

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9. You shouldn’t neglect your retirement plan

While you might get tempted to sacrifice your retirement for a child’s college or other expenses, be careful. By the time you’re 20 years away from retirement, it’s vital to have reached 80% of your savings goals.

So, be sure to contribute as much as possible to tax-favored accounts, such as a 401(k) or IRA, even if you can’t max them out. If your employer offers matching funds, always contribute enough to get the full amount. Otherwise, you’re leaving free money on the table.

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10. You should plan early for college expenses

If you can afford to set aside money for a child’s future education expenses (without jeopardizing your retirement), start as early as possible. The cost of college rises faster than inflation every year, with no signs of slowing down.

One way to get ahead of education expenses is to open and regularly fund a 529 college savings plan.

One way to get ahead of education expenses is to open and regularly fund a 529 college savings plan. You can use it for any college, university, vocational school, or post-secondary institute recognized by the U.S. Department of Education. Qualified 529 expenses include reasonable room and board, tuition, books, fees, and equipment. If your plan allows it, you can also use up to $10,000 per year for public or private schools for kindergarten through 12th-grade students.

You can also invite friends and family members to make 529 contributions for your child’s birthday or a holiday gift. GiftofCollege.com is an online gift registry that can help facilitate those contributions.

Be aware that 529 contributions are not deductible on your federal tax return. However, if you live in a state that collects income tax, it may offer a tax deduction or credit for participating in an in-state 529 plan.

This article originally appeared on QuickAndDirtyTips.com and was syndicated by MediaFeed.org.

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