Many consider having a baby to be one of life’s most precious journeys. However, one of its many challenges is that it’s also one of life’s most expensive journeys.
Of course, the decision to have a child doesn’t come lightly for any new or soon-to-be parent. And while it might feel strange to let a 3rd party in on the decision-making process, having a financial advisor as part of this decision can open doors for your growing family that you didn’t know were possible. When it comes to having a baby, it really does take a village, and the right financial advisor will be well-equipped to help you adjust and save for one of life’s greatest gifts.
Saving for a baby goes far beyond how many diapers you’ll need to purchase in a month. From hospital costs to saving for your child’s education, the amount of information being thrown at you can be overwhelming. Having a financial advisor in your corner will give you the confidence and strategic advice you need so you can give your child the world. Here, I’ll share a glimpse of the financial checklist that’s necessary to conquer before your bundle of joy arrives.
Ensure that your family is insured.
Financial protection is a topic that many seek advice for from their financial advisors. When a new child is involved, there is a lot of insurance information that needs to be either fully understood and potentially adjusted in order to make growing your family that much smoother. For example, your medical insurance will obviously play an important role in the prenatal care and delivery of your baby. Know what your insurance covers, and what the possible impending hospital costs can add up to. Your financial advisor will be able to help you investigate these expenses and ultimately advise you towards savings plans or better coverage.
Thoroughly researching and purchasing life insurance if you don’t already have any through work or personal means is essential while planning for a baby. As seen in this MassMutual video, one of the most common reasons to choose life insurance is to protect your family. The video states, “Particularly if you are the breadwinner, you may want to provide an income stream to your spouse in case of an unexpected death.” The most suitable type and amount will vary from family to family, based on your specific circumstances. In general, just as proper auto insurance will cover the financial cost of a car, or homeowners insurance should equal the value of rebuilding your home, life insurance should equal the value of your lost income should you pass away unexpectedly.
Plan on saving for rising education costs.
Saving for college is a worry that many seasoned and new parents share. With costs seeming to rise aggressively from year to year, it’s almost impossible to know what the best amount is to save. However, there are many strategies a financial advisor can discuss with you to ensure that you are contributing at least a small amount of money over time to college funds. Programs such as a 529 Plan or a Coverdell Education Savings Account are some of the better known options to jumpstart your savings, though your financial advisor will be able to recommend a strategy that’s best for you. Use time to your advantage; college may seem like a long way off for a newborn, but starting early is in your best interest. In fact, if you remember my recent article, “Why You Should See A Financial Planner Early in Life,” you’ll know that the compounding interest you can earn from having savings in the right accounts will only get larger as time goes on.
How to handle an emergency.
Life will happen, and many new parents will tell you that while they know this, the unpredictability of life’s events is even scarier when you have a child. Save yourself the pain and anxiety later by saving up for an emergency now. For example, investing in disability insurance for your entire family will give you coverage should something occur that inhibits you from working. In addition, Having your will and beneficiaries updated to include your child (and your spouse) will also give you the chance to assign a guardian to your baby and give them the coverage they would need if a tragedy happens.
Unexpected life events are an area where financial advisors can really help a growing family. Most people know the fundamental elements of saving, but having a financial advisor to guide you in setting aside an appropriate amount of accessible and secure emergency funds will give you peace of mind that you are prepared for whatever life throws at you.
Make room for baby in your budget.
This entire list will not be possible if you don’t make room for your baby in your budget. There are dozens of life-hacks that can save you cash here and there that will add up in your favor in the long run! Things like looking for hand-me-downs instead of new clothes and waiting to buy bottles in bulk until you know what your child likes are common tips for new parents, but making room in your budget now will allow you to focus on your beautiful child when they arrive and not on adjusting expenses.
Choosing to contact a financial advisor is an important first step after deciding to have a baby. While help is always available through friends and family, a financial advisor can educate you on a wide range of financial strategies so you can make an informed decision on what is best for your own family. And, a good advisor will be there for you through many of life’s changes, challenges and celebrations . It may not be as fun as picking out baby names, but it certainly will be fun raising your child with confidence, knowing you have the right support systems on your side.