To continue with this month’s focus on prebaby paperwork, today […]
To continue with this month’s focus on prebaby paperwork, today Jeannine McCurrie, a mother of two and the author of “My Plan B Handbook,” will share tips on what financial matters are important for new and expectant parents to consider. After Jeannine’s husband unexpectedly passed away in 2008, she started her own business, My Plan B, to inspire others to learn from her experience and take action by documenting important financial and personal information.
During your pregnancy, your focus is on that amazing life growing inside you. Then after the baby arrives, you begin asking yourself some tough questions. How will we pay for college? Are our insurance needs covered? Who would care for and financially support our child in our absence?
Seek professional advice
Financial planning for your child’s future can be overwhelming and causes many parents to stall on making some important decisions. In my experience, the best way to get started is to meet with a financial advisor. An advisor can help you manage your portfolio, discuss your insurance needs, work with you to map out financial goals and provide a number of strategies to put you on the road to meeting those goals. One misconception is that you need to “qualify” to work with a financial planner, but there are a myriad of advisors and resources available to those at every income level.
Insurance should be taken care of before or within a week of your baby’s arrival. First and foremost is a health care plan for your baby. Mom and baby are both covered on mom’s plan during delivery, but once the baby is born, he or she needs to be officially added to a parent’s plan or have his or her own plan because there will be two separate bills from your hospital stay.
It’s also a good time to think about investing in or expanding your life insurance and disability coverage to meet your growing family’s needs. If you or your child’s other parent or guardian were to pass away, you want to have solid coverage to ensure the rest of your family is able to continue their standard of living, pay day-to-day bills, make house or rent payments, save for school and cover childcare costs. This type of insurance also helps pay for funeral and burial costs.
As a widow and the mom of two children, I was so grateful that my husband and I did take the time to plan ahead. We had life insurance and wills documented before Darin passed away, and I can’t imagine having to deal with financial stress on top of grieving the loss of a loved one.
Work leave of absence/childcare costs
You need to plan for parental leave of absences from work once your baby is born. Many parents are guaranteed under the Family and Medical Leave Act to have 12 weeks off to recover and bond with their babies, but most employers don’t offer paid leave. During your pregnancy, see if your company’s and/or an independent short-term disability policy is an option for replacing part of your income.
It’s also wise to make childcare decisions before your maternity leave so you can focus that time on caring for and bonding with your baby. Childcare is a new expense for every person who welcomes their first child, and you need to decide what works best for you and your partner. For some, it’s most cost-efficient for one parent to stay home, while others can afford to enroll their baby in daycare. For single parents, it’s a delicate balance creating an affordable work/life blend.
Just thinking about saving for a child’s college education can cause a migraine, but you need to start saving early (preferably the year your baby is born) by regularly contributing to a dedicated college savings vehicle, such as a 529 plan or Roth IRA. Research shows that parents or grandparents who use automated savings plans to build an education nest-egg are significantly more successful than those who don’t. There are also tax advantages to 529 plans.
One encouraging note on college savings: in my recent work with State Farm on a survey about financial preparedness for an unexpected life crisis, 91 percent of American adults said they are not likely to use money from a child’s education fund to make ends meet—showing many people place a high value on education even during tough economic times.
Budgeting is never fun, but it doesn’t have to be a negative experience. It gives us the opportunity to take responsibility, monitor our spending, communicate better with family members and think outside the box. For example, date nights are tough but necessary for a couple to stay connected. For a single parent, a night out with friends or family members is important for your well-being. Aside from being tight on time, you may also be tight on disposable funds. So ask a family member or trusted friend to babysit so you can sneak away with a significant other or friend for a cup of coffee, picnic lunch or to catch a movie. Adult conversation is necessary to recharge your battery.
As your kids grow up and get more mobile, there are also many inexpensive, enjoyable family activities and complimentary community resources available to keep everyone laughing and entertained while still saving for the kiddos’ college years.
Next week on Ask the Experts: Preparing a will
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