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Planning for Children

Last week we talked about Marriage.  Here is the next step!


According to the latest data from the USDA, parents should expect to spend between $200,000 and $300,000 raising a child from birth to age 17. And that's just spending on necessities like food, clothing, transportation, and medical care! It's never too early to start plotting key transitions like college on your family's $Lifeline and making a plan to achieve those goals. 


You and your partner probably have an extensive to-do list lined up for the next nine months. Try to tackle the following financial prep items a little at a time as you move closer to the big day. 


First Trimester: Review Your Household Budget


The average cost for labor and delivery in the U.S. is over $4,500. You could easily spend another $1,000 on newborn clothes, toys, a crib, car seats, strollers, and other essentials. Add in new monthly expenses like diapers, baby food, and day care, plus any changes to your or your spouse's employment status, and it's safe to say that your new family probably needs a new budget. 


One of the best ways to accommodate new budget items without adjusting your savings and investing goals is to cut back on inessential expenses. Planning out a week's worth of meals before you go grocery shopping can reduce fast food runs. Cancelling subscriptions that you don't use will give you a little extra cash to spend in the baby aisle. And paying down any monthly credit card debt you're carrying now will give you more financial flexibility once baby arrives. 


Second Trimester: Update Your Estate Plan


No one likes to think about worst-case scenarios, which is one reason why so many people put off their estate planning. But you really won’t be in the mood to write or update your will and health care directive when you're caring for a newborn. Have these tough conversations with your partner ahead of time. That includes deciding whom you want to take care of your child in the event that you are unable to. 


Also, if you and your partner don't have life insurance, it's probably time to purchase some. The younger and healthier you are, the lower your rates will be and the more coverage you'll be able to afford. 


Technically, you won't be able to complete the last step in this process until after your baby arrives: adding him or her to your list of beneficiaries on all estate planning documents. But you can get a head start by talking to your financial advisor, insurance broker, and attorney about what information you'll need to gather and what paperwork you'll need to complete. 


Third Trimester: Plan for the Future


A 529 investment plan can help parents start saving for college expenses. Deposits and withdrawals are tax-free, and in recent years permissible uses have expanded to include partial K-12 tuition, textbooks, and student loan repayment. You have up to six months after opening an account to assign a name and Social Security number, so you don't have to wait until your baby is born to start a 529.


You will need your baby's info if you want to open a custodial investment or savings account. One simple idea as you're waiting and weighing your options is to start setting aside cash that you'll put into one of these accounts later. Once you and your spouse adjust to your new responsibilities as parents, you might have an easier time deciding on the most efficient ways to start investing in your child's future. 


The only thing we love almost as much as new babies is helping new parents give those babies a head start. Let’s talk soon about how our Life-Centered Planning process can help support your growing family.