Planning for Expecting Parents

Starting a family brings joy, stress, excitement and discussions over where to put the bassinet in your house. It brings questions about getting your financial house in order, too. Here’s a financial to-do list before the little bundle arrives.

As expecting parents you face a long list of stuff to buy. Along with the wipies and the pretty mobiles, remember to plan your spending, estate and insurance coverage for your new family.

Spending and savings plan. The average middle-income couple needs $241,080 to raise a child, not including extras like sports or clubs, private schools and dance classes, to name a few. A quarter of a million dollars per child, even though it hits you over time, means examining all aspects of your family budget.

  • Build your emergency savings fund to three to six months of living expenses. Err on the side of caution especially if only one of you plans to work.
  • Imagine your expenses with diapers, formula and baby food in the mix. Start pricing these items and allow for them in your household budget.
  • Does your vehicle safely accommodate a car seat? Do you need to save for a second or replacement car?
  • This report The U.S. Census Bureau says child care costs skyrocket year after year. Check your local costs of child care whether in daycare groups, individual care or with nannies. Do you or your spouse plan to stay at home? Account for these costs and changes when you sketch out your new financial picture.
  • Start saving for college as early as possible using such accounts as a Coverdell ESA or a 529 plan.

Estate planning. No one likes thinking about how parents’ deaths affect a family, but you must prepare and protect yourselves.

  • Draw up a will or review your existing one. Wills ensure that your assets go where you wish; they also allow you to assign an executor to handle your estate and select a guardian for your children.
  • When choosing your children’s guardian, ask yourself who your children feel most comfortable with and who can responsibly control any funds left to the children. Consider the potential guardian’s values and beliefs and overall emotional comfort they provide to your children. Discuss the matter with the guardian first and nominate a contingent if your primary won’t or can’t serve.
  • A trust document spells out how you like any funds left to your children managed and spent. You can also appoint a trustee (again, pick a primary and a contingent) to manage the funds.

Risk management. The right protection matters as much as a detailed spending and estate plan. Evaluate your life, health and disability insurance in case something happens to you or your spouse.

  • Life insurance replaces lost income if you or your spouse die. If you lack coverage or hold an existing policy, consult with your agent on the appropriate coverage, considering such items as income levels, debt load and assets.
  • Disability insurance, often overlooked, ensures you receive an ongoing percentage of your current income if you become disabled for a short or extended period.
  • Review your health coverage and understand the parameters and costs of routine check-ups, prescriptions, premiums, deductibles and co-pays.

New parenthood brings breathtaking and often surprising commitments. Remember that not all of them involve just picking a stroller – and many come with potentially larger and long-lasting consequences.

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Mary Beth Storjohann, CFP(R), is the founder of Workable Wealth, an RIA in San Diego. She is a writer, speaker and financial coach who is passionate about working with individuals and couples in their 20s and 30s to help them organize and gain confidence in their financial lives. She has been quoted or featured in various industry publications on the local and national level. You can find her on Twitter at @marybstorj.

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