Financial Planning Concerns for New Parents

Congratulations! You will be welcoming a little bundle of joy into your household!  A million things are running through your mind: What will he look like? What will we name him? How will our lives be different?  I can’t answer any of these questions for you, but here are a few financial planning topics to keep on your radar:

Insurance:

Now that someone depends on you for his full financial and emotional support, you need to make sure he is protected in case you are no longer around. The idea behind life insurance at this stage is to replace your income and allow your family members to maintain their standard of living. You’ll need to consider the cost of final expenses, like burial and funeral costs, paying off your mortgage and other debts and pre-funding goals like paying for education expenses. Also, if you don’t have disability insurance, now’s the time to explore your options. If you are sick or injured and cannot work, how will you replace your income? Many employers offer disability policies for their employees for a small contribution per paycheck. You also could obtain coverage through an independent agent.

Estate Planning:

This part is pretty straightforward. If you don’t have a will, you need one.  If you are incapacitated or no longer around, whom would you want to take care of your little one? Naming a guardian is one of the most important aspects of your estate plan when you have minor dependents. That is one thing you do not want to leave up to the court system to decide.

Budget Items:

The things you spend money on are likely to change dramatically. Eating at nice restaurants, nights out with the guys or girls and elaborate vacations may be replaced with diapers, daycare and college fund contributions.  The money you used to spend on nice purses, shoes and outfits will now go to diaper bags, car seat accessories and outfits for someone whose size changes on a monthly basis.

You have a lot of big expenses to plan for on the front end.  You’ll need to equip your house with new furniture like a crib, changing table, rocking chair and maybe a dresser for the baby’s clothing.  You also will need a car seat (which likely comes with multiple attachments) and possibly other items like a stroller, bouncer seat, swing and high chair. Make a list of all of the more expensive baby items that you need and want. Is there anything you can borrow from someone else?  Check the selection at local consignment shops.  Split large purchases up among the months you have remaining in your pregnancy, so your cash flow doesn’t take a big hit all at once.

You will receive a lot of great gifts from friends and family, but in my experience, these gifts tend to be blankets, cute outfits and toys, not the expensive items on your registry. For items you will be purchasing on a regular basis (diapers, wipes, formula, baby food), look into “subscribe and save” options on sites like Amazon Prime. Items will be delivered straight to your doorstep, saving you a trip to the store, and these merchants usually give a discount for recurring orders.

Education Planning:

Have you ever heard the saying “A dollar today is worth more than a dollar tomorrow”? If you want to foot the bill for your child’s college education, the sooner you start planning, the better. When your child is an infant, you have the time value of money on your side. The older he gets, the less time these funds have to grow. Get in the habit now of putting away a certain amount every month to help pay for this goal.  Encourage grandparents, friends and family to contribute to this fund for holidays and birthday gifts instead of adding to the piles of toys you are already accumulating.

Welcome to parenthood!

Jamie Bosse, CFP®, RFC, is a financial planner at KHC Wealth Management. Jamie loves to write, travel, barbecue, watch the Kansas State Wildcats win football games and spend time with her husband, son and pet corgi.