Having a baby

Financial Planning for having a baby includes:

    Planning for the opportunities he or she will have,

    Planning for the time when the baby needs constant care, and deciding how to pay for it through lost wages if one of you stays home or childcare expenses, and

    Ensuring that your financial safety net is well in place for the whole family.

Babies are 100% dependent on you. Children of all ages need health insurance, clothing, and opportunities to grow and have fun. As your baby grows you will need to pay for childcare expenses if both of you work. After your child begins school you may still need to provide for late afternoon childcare or babysitting. At the same time, you are funding lessons, teams, and vacations. Meanwhile you are thinking about how to pay for college…

Pre-natal planning

The first step in planning is to financially design the pre-natal period and birth time.

Regarding the pre-natal time, suddenly, the baby's well-being trumps everything. Some women work right up to the birth. Others don't want to work or can't work late into their pregnancy. Personally, I was on bed rest for four months of my pregnancy. When do you want to stop working in your pregnancy? When could you financially stop working?

Are you covered by insurance? Most policies have and annual deductible. If you are pregnant over a January 1^st, you may pay two annual deductibles. Sometimes, careful planning about the timing of pre-natal visits, sonograms, and blood-work can maximize your use of insurance. Do you want to have your child outside of the hospital? Will your insurance cover you if you do? Can you afford to pay a mid-wife out of your own pocket?

If you work for a company with benefits, contact your human resources department and get educated about available benefits in your company and state. These benefits may include health insurance for the baby, leave of absence rights, short-term disability benefits and childcare at work. Know what's available so you can do intelligent planning.

After the baby's born

Regarding the birth and time right after, how long do you want to be able to be out of work after the birth? Can you afford it? Can you find creative ways to earn income with your baby in the house? Will your employer allow you to take as much time off as you'd like?

Once you do both go back to work, you will need to plan for childcare expenses. Does to make economic sense to work if you are paying most of your salary in childcare? If it does, what's the best childcare option for you and your child, and how much does it cost?

Safety Net Needs

Life Insurance

If you are expecting a baby, take a look at getting life insurance. Life insurance will protect the surviving parent and ensure they can take care of the child on one person's income or no income.

We recommend both parents have policies for an amount that will pay for at least five years of recovery time for the surviving parent. To figure out how big a policy you need, multiply your salary by the number of years you want to protect your family. These policies can be term insurance for the number of years you will have dependent children. If your work provides life insurance, that's a start. If you feel secure in your employment, you can buy individual policies to supplement what you have.

The primary reason to buy life insurance is that it creates the money your family needs and doesn't have if something happens to you. If you have plenty of money, you may want insurance for other reasons, but you don't require it. As you get older and have more assets, and as your children become independent, insurance needs may steadily decrease.

Draw up a will

You both need a will. The will lays out where your assets will go if you die, names your child's guardian and names your executer, (the person who will administer your estate).

Your choice for guardian is a major decision. Sometimes, it's obvious who you want to be the guardian for your kids. In other family situations, this choice may be quite difficult either because there are so many options or so few.

Make a choice. You can always change guardians later if circumstances change or your wishes change. If you don't make a choice, the state will choose the next of kin as guardian for your children. In some situations, this may not be your first choice.

We also recommend that you make sure your executer and guardian understand and agree to your plans. Let them know where you keep your wills and trusts, your financial information and all your records regarding your children. This will make their job much easier if the need to take over for you.

If you have a will or trust, review and update it to insure it reflects your new family members and current wishes.

Barbara Bachelder, CFP® for Wealth by Design, LLC