Okay, okay, all the mothers out there were right: there is nothing like the love you feel for your children.
As a new mom, I get it now. There is no other way to describe it besides “unconditional.” I guess that is why—despite the sleepless nights, constant diaper changes, and (let’s be honest) nonstop expenses—I melt every time I see my son smile.
But while Abe makes my heart full, I sometimes feel he is making my wallet empty. For other new or expecting parents, I have no tips for the sleepless nights or the endless diapers. But I can share some advice about how my husband and I prepared for the big expense that comes with such a tiny human.
1. Consider purchasing term life insurance.
There is now a new person depending on your contribution to the household, whether you stay home or go back to work. If something were to happen to you or your partner, term life insurance is generally the most cost-effective way to make sure your baby would be financially protected. To determine the amount and length of term appropriate for each of you, talk to your financial advisor.
Tip: If you are currently expecting, try to get your insurance executed before your third trimester (when it becomes much more challenging due to the medical exam requirements). Trust me—I learned this the hard way!
2. Execute your estate documents.
While we’re on the subject of preparing for the worst, ask yourself this: if something happened to you and your spouse, would you want the court to decide who raised your child? Probably not. Listing a guardian for your minor child(ren) in your will is the best way ensure your wishes are upheld after your death. In addition to wills, it is important to execute other estate documents such as powers of attorney, healthcare documents, and potentially a trust.
3. Automate everything you can.
Now that I’m juggling full-time work and full-time parenting, I’ve learned to automate everything possible. For example, by setting up automatic payments for daycare and signing up for regular shipments of some of my essentials from Amazon, I have simplified the day-to-day tasks and can spend more time enjoying my family time.
If you are concerned about the expense of childcare, try setting up automatic payments from your checking to another separate account prior to baby’s arrival. This will give you a chance to adjust your cash flow ahead of time rather than adding another adjustment once the baby comes.
4. Figure out what you really need—and focus on the essentials.
When I was planning for Abe’s arrival, registering for baby items sounded like a fun activity. Unfortunately, I quickly became overwhelmed by all the choices. Does he need a DocATot, a swing, a bouncy chair, a mamaRoo, a boppy, or a Rock ‘n Play?
Social media and advertisements suggest you need all those items—and more—to survive the first year of your child’s life. However, all babies are different. For example, Abe prefers his $25 bouncy seat to the $80 swing I borrowed from my sister (her son hated it, too!). If you’d still rather stock up ahead of time, try shopping at second hand stores or swap sites. Most of Abe’s clothes now come from Once Upon a Child—especially once I realized how quickly he grows out of them.
Tip: Diapers may be the one thing you want to stock up on in bulk, but buy mostly sizes 1 and 2. Some babies are too big for “newborn” diapers or grow out of them quickly.
5. Start planning for your child’s education.
During the first few weeks (or months) after becoming a parent, it is important to take one day at a time. But, once you get the hang of things (or re-establish a level of functionality), you can start considering future goals you have for your child. Do you want to send him or her to private school? Do you want to help fund her or his college tuition? If so, with ever-increasing tuition costs, advance planning is key.
A great way to start saving for education is through a 529 Plan, which allows you to make contributions to an education fund. The account grows tax-deferred, and the funds can be withdrawn tax-free if they are used for qualified education expenses. Plus, many states allow a tax deduction for the contribution. With the new tax law, you can now pay up to $10,000 of grade school and high school costs annually per student in addition to being able pay any amount of higher education costs (think: trade school, undergraduate school, and post-graduate school).
While 529 accounts can be beneficial, it’s important not to overfund them, since they’re only intended for education costs. That means you’ll be hit by penalties and taxes if you end up using them for something else. If you’d rather have flexibility with your funds—for example, if your child ends up getting a scholarship or choosing a different route than college—it’s safer to open an individual or joint account and designate it for education expenses.
Tip: Be sure to include a TOD, “Transfer on Death,” designation on the account so the funds avoid probate if something were to happen to you.
There’s no way to fully prepare for becoming a parent. Those middle-of-the-night wake up calls and inconvenient blow-outs will always be a challenge, but preparing financially will give you some peace of mind. If Abe is any indication, that bundle of joy can give you both full heart and a full wallet with a little planning.
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This post was written by a member of the Plancorp Women’s Initiative, which strives to advocate for clients and women in the community by addressing topics specific to their financial lives. For more information about the Women’s Initiative and how you can get involved, email haleigh@plancorp.com or visit the Plancorp Women’s Initiative page.
