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Having a child need
not mean kissing
savings goodbye

IF you are a new parent, you're probably enjoying one of the happiest times of your life. And you'll find it's easy to get absorbed in the day-to-day activities of your child. Yet, with the addition of a child, your family has a whole new set of financial needs -- so you'll want to plan and prepare for them.

Here are a few ideas to consider:

» Draw up a simple will -- By drawing up a simple will, you can designate, within limits, how you want your assets distributed, and you can identify a guardian for your child, should anything happen to you and your spouse. If you die without a will ("intestate"), the courts may have to make all sorts of decisions regarding your estate and the future of your child -- and there's no guarantee that these actions will be what you would have chosen.

» Set up a trust -- If you have sizable assets, you may want to set up a family trust, which, among other advantages, gives you significant control over how you want your estate's assets distributed; for example, you can leave money to your children in increments, rather than all at once, when they reach 18.

» Review your insurance coverage -- As soon as you become a parent, you'll need sufficient life insurance to help provide for your child, should anything happen to you. You may want to take out enough insurance to cover both your mortgage and your child's college education. And make sure your beneficiary designations are up to date.

» Open a Section 529 college savings plan -- For the past several years, college costs have increased much faster than the general rate of inflation. If you have a newborn, who knows how much he or she will have to pay for college in 18 years? That's why you may want to open a Section 529 college savings plan. Your earnings will have an opportunity to grow tax-free, as long as the money is used to help pay for college, although the money will appear as income on the child's tax return. (Unless the laws change, this tax benefit is scheduled to expire on December 31, 2010.)

» Keep saving for your own retirement -- Even if you do open a Section 529 plan or another college-savings vehicle, you'll still need to continue saving for your own retirement. Try to "max out" on your IRA and your 401(k) or other type of employer-sponsored retirement plan. If your child has to take out a loan to go to school, he or she has many years to pay it back, but if you run short of retirement income, you won't get a second chance.

» Take advantage of tax breaks for new parents -- Once you have a child, you get a dependent exemption and, depending on your income, a child tax credit. But you can get other tax advantages, too, such as potential deductions for child care expenses. See your tax adviser to make sure you're getting all the breaks you're entitled to as a parent.

Enjoy these days when you've got a new child. But at the same time, keep your eye on the future -- it will be here before you know it.