7 Money Moves to Make Before Adopting a Child

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  • Raising a child is expensive. The more prepared you are for the extra expense, the more time you'll have to focus on your growing family.
  • Getting your financial ducks in a row includes making sure health insurance coverage is adequate, you have enough life insurance, and you have a will in place to protect your child.

Whether you become a parent through birth or adoption, life is easier when your finances are in order.

Bringing a new child into the home can be expensive, whether you're paying medical costs to give birth or adoption fees. If you're adopting a child from the foster care system, the fees will likely be relatively low. If you're taking part in a private adoption, you could be looking at costs ranging from $30,000 to $60,000.

If the cost of adoption runs in the tens of thousands, it's essential to get your financial ducks in a row. That means making sure you have the money to cover fees but can continue to invest for the future. It may sound overwhelming, but you don't have to do it all at once. Choose one goal to hit before moving on to the next.

First things first

Before we go any further, though, the United Way offers adoptive parents these tips for avoiding scams and keeping money in your bank account.

  • Before handing money over to a facilitator who promises to find you a child, check their references carefully. Adoption facilitators are not well regulated and are illegal in many states.
  • Consider it a red flag if a birth mother asks you for money. While it's true that expectant mothers may need financial assistance, all financial transactions should be handled by an attorney or adoption agency. Simply put, you're emotionally involved and, therefore, easier to manipulate.
  • If you're working with a woman who is still early into her pregnancy, know that she may change her mind. Money paid may not result in you adopting her child.
  • Take part in online forums for potential adoptive parents. According to the United Way, members there report current scams.

Money moves to make

As you move toward the day you'll welcome a new child into your home, make sure your finances are in order. Here are seven steps that will serve your growing family well.

1. Review health insurance

Whether you have employer-sponsored health insurance or purchase your own coverage, read through to make sure you have everything you need. For example, if you pay a low premium, you probably have a high deductible. Consider whether it's time to lower your deductible now that a child will be covered.

Everything -- from checkups to bumps and broken bones -- requires you to pay out-of-pocket. Take a look at the maximum out-of-pocket amount you're expected to pay on your current policy and decide whether that amount still works for you or if you need to tweak it. The lower your deductible and out-of-pocket expenses, the more expensive your premiums will be.

2. Create a new budget

One of the most shocking things about parenthood is how expensive children can be. You'll need to update your monthly budget to include things like daycare costs, diapers, formula, clothing, and all the gear a child needs.

3. Adjust your emergency fund

Take a look at your emergency fund. If you were to get sick or lose your job, how long would you be able to get by without income? Would you have enough money to take time off work if your child needs you home?

4. Open a 529 account

Even if you're adopting a newborn, that kiddo may want to go to college one day. A 529 account can help you save while also receiving a tax break.

5. Buy additional life insurance

Now that you'll have a child depending on your income, make sure you have a large enough life insurance policy to cover their needs if you die before they're grown. The great news about life insurance is that term life policies are relatively inexpensive.

6. Update your will

If you have a will, it's time to include your new child. If you don't have a will, now is the time to have one written. Your will is a blueprint for what you want to happen after you die. In addition to stating your beneficiaries, a will also allows you to name who you want to care for your child after you die.

7. Get registered

Chances are, a whole lot of people are going to be excited about you becoming a parent. Harness that excitement by registering for all those items you would typically have to pay for yourself. No matter how old the child you're adopting is, allow the people who care about you to help stock the house with things your child will need.

There are few things more satisfying in life than loving and molding a child. Preparing for the financial aspect of being a parent means having more time to focus on enjoying your family.

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