My brother and his wife had their first child at the end of April and I became an aunt. It was an exciting personal event but also got me thinking about all the financial decisions my brother and his wife, as well as my clients, face when they decide to have a baby. I’ll touch on some of the most critical planning concerns for expecting parents in this post.
It probably comes as no surprise that your expenses are likely to change. Often times they increase but I’ve also seen them shift. What I mean by “shift” is that now more time is being devoted to new parenthood so some of the entertainment expenses you had are now automatically directed elsewhere. Babycenter.com has this detailed calculator to help you estimate first year expenses. I recommend parents-to-be practice cost increases by saving comparable amounts before expenses are required.
If possible, plan ahead so that your health insurance best meets the cost you will incur with prenatal checkups, labor and birth at the hospital as well as the numerous doctor’s visits your child will have in the first year. You’ll want to consider the monthly premium in conjunction with your deductible and co-pays. In my nephew’s case, choosing the right plan turned out to be even more important than expected. He was premature, but healthy, and required a little extra care.
Estate Planning and Life Insurance
Many young families might think, “Why estate planning? We don’t have an estate to plan!” The term “estate planning” covers a number of items. When you have children, one of the most critical is nominating guardians for them. This can be part of your Will. Life insurance is necessary so that if something happened to one or the other spouse then the surviving spouse and child would have financial stability even in the face of a life changing loss.
SaveUp supports expecting parents by offering a college savings prize among others! Money magazine offers tips here. Even with the most diligent financial plan, parenting brings numerous unknowns. Like all financial planning, it is an ongoing process, adjustments will have to be made, circumstances will change, strategies will need to be reconsidered. If you have additional questions or need guidance a fee-only CERTIFIED FINANCIAL PLANNER™ can help you. Here are two links to help you find those resources Garrett Planning Network and NAFPA. Consider the tips above so that you and your new baby can SaveUp!
This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.