Preparation for the First-Time Family
for a new child can be an overwhelming process. There is just
so much to plan for and do - thinking about money can take a back
seat to more exciting tasks such as selecting a name and choosing
birth announcements. However, planning for the many financial
changes up ahead should be done sooner rather than later. Chances
are you won't have a lot of time (or energy) after the baby is
born to spend on rearranging your finances. If you start now,
you will set a comfortable foundation for you and your family
when you most need it.
your financial expectation and values.
If you have never considered what money means to you, now is the
time. You and your partner should be perfectly clear about your
individual financial expectations and value systems. Discuss your
spending, saving and investment styles. Are you a spender, she
a saver? Does the slightest amount of risk send you overboard
with worry, while he is happy playing the lottery?
about what kind of life you want to have for your child. Have
you always imagined sending your child to summer camps and private
schools, then picking up the tab for college tuition - or believe
in public education and having your child pay for his or her own
college expenses. Do you want to lavish your child with only the
most expensive toys and clothes, or prefer a more austere lifestyle?
of these questions are simple, and there are no right or wrong
answers. Opinions vary widely and you may find significant differences
in how each of you perceives money. Which is why it is vital that
you discuss - and resolve - these issues before conflict arises.
You may be too busy to give this important subject your full attention
your current and anticipated budget
If you haven't yet sat down and looked at your spending habits,
do so now. Most people can benefit from a serious budget analysis
at least once a year. It helps to review each line item and make
conscious expense choices. Seeing the numbers in black and white
is a critical reality check, particularly at this juncture in
people's budgets change dramatically after the birth of a baby.
Some expenses may decrease (entertainment, dining out, and vacation
costs often decline in the first couple of years), while many
increase. Most people are surprised at how much having a child
can actually cost. Cribs, bedding, clothes, diapers, toys, car
seats, strollers - and on and on - can cost a hair-raising figure.
If you need help deciding what to buy, quiz other parents about
what they most valued. You may be surprised at how few cute stuffed
animals you need and how many blankets you require.
showers can be a great way of reducing the initial outlay. Be
sure to ask for what you truly want and need. Invite friends and
family members who have had children to donate to your "baby
fund." Often they will be happy to clear out some closet
space for such a good cause.
You will be soon responsible for another life - a daunting prospect.
But you can reduce the amount of stress this thought can generate
by planning ahead. Emergencies happen. If you don't have it already,
consider adding insurance to your budget. Life insurance will
provide a financial benefit to your child if you die, disability
insurance will keep money flowing if you can't work, and health
insurance will pay for all the doctor bills and other medical
expenses that are an inevitable part of every child's life.
key aspect of planning for emergencies is setting up a savings
account. A good rule of thumb is having three to six months worth
of expenses in an account where you won't be charged early withdrawal
penalties or assessed an excessive tax. If you want to go even
further, you can plan now for higher education costs by setting
up an Educational IRA or a 529 plan. Both will allow you to contribute
pre-tax dollars to your child's college fund.
keep in mind that your child will learn financial habits from
you, so commit yourself to providing the best education possible.
By living within your means and not relying on credit to pay for
things you can't actually afford, you will be sending a powerful
and positive message your child will remember for a lifetime.