Before Welcoming Your New Family Member
Calculate Your Parental Leave
California offers new parents — including foster and adoptive parents — up to eight weeks of paid family leave. You won’t receive your regular wage, however, as payments are about 60% to 70% of your weekly wages earned five to 18 months before your claim start date, according to the Employment Development Department (EDD), which administers these benefits. The EDD offers a benefits payment calculator, so you can budget your income during the leave period.
Rework Your Budget
It may be difficult to think of all the ways a child will impact your budget. Factor in the cost of birth or adoption fees, along with essentials like clothing, food, and diapers. Will you pay for childcare, or will a family member or friend help you? Account for how your lifestyle might change as well. Consider how much the costs of dining out, subscription services, attending events, or vacations will change.
Increase Your Emergency Savings
Your cost of living will increase with the new addition to your family. By increasing how much you’re saving each month, you’ll be better prepared to take advantage of opportunities or protect against unforeseen events. If you haven’t already, automate a transfer of funds into your savings account every month.
Once Your Family Has Grown
Capitalize on Tax Breaks
The state of California and the federal government offer tax credits for qualifying children. There are strict eligibility requirements, so work with a certified public accountant (CPA) or licensed tax preparer to avoid penalties and maximize your benefits.
Update Your Health Benefits Coverage
If you’re an active member who has health insurance through CalPERS, contact your personnel office to add your new child to your health coverage. This is considered a qualifying life event, making you eligible for a special enrollment period.
Your employer will need a copy of the birth certificate or adoption papers and your new child’s Social Security number. Retirees will need to contact CalPERS directly. You must submit your request within 60 days following the life event.
Planning for the Future
Update Your Beneficiary Designation
The birth or adoption of a child revokes a beneficiary designation you may have on file with CalPERS. Review and update your beneficiary designation online or by mail. Do this for any other retirement savings accounts you may have.
Submit a Power of Attorney Form
You can ensure your hard-earned benefits are protected and passed on to your loved ones by filling out the CalPERS special power of attorney form (PDF). This document designates a representative to conduct your retirement business if you’re unable to do so. If you have a power of attorney set up through another resource, make sure the documents specifically grant the attorney-in-fact authority to conduct business with CalPERS.
Establish an Estate Plan
If you haven’t already, now is the time to set up an estate plan. This includes a will, living trust, durable power of attorney, and advanced health care directive. You’ll also need to designate a legal guardian for your child.
In California there are two types of guardianship. You can appoint a guardianship of the person (your child), and a guardianship of the estate (their inheritance), or both. These don’t have to be the same person. Work with an attorney to account for all the nuances of appointing a guardian.
Consider Life Insurance
There are several types of life insurance available. Having coverage can provide for your child should the unthinkable happen. Determine what type of coverage you need, how much, and obtain a few quotes. Once you select the policy that works for you, speak with your attorney about how to include it in your estate plan.
Save for School
You can save for your child’s education using ScholarShare 529, California’s tax-advantaged education savings program. ScholarShare includes flexible spending benefits, so the money you save doesn’t have to be used exclusively on a college education. It can also be used for apprentice programs or qualifying K-12 tuition, and you can transfer funds to another eligible beneficiary at no extra cost or roll over up to $35,000 into a Roth IRA.
Continue to Save for Retirement
Saving for retirement and college can be a daunting task, but planning early can make it easier as your family grows over time. We’ve gathered topics to consider when saving for both.
A solid financial foundation will support you as you embark on the journey of parenthood, so you can enjoy every moment.