8 Financial Moves to Make When Expecting a Child
In just a handful of months, I hope to become a first time father. This is an exciting time filled with lots of thoughts and feelings (and questioning of my abilities as a parent!). But naturally, my mind also tends to gravitate towards the financial implications that will come along the added member to the tribe.
This is not at all uncommon. I see the financial decisions people make when expecting. Quite often, soon-to-be parents look to upsize their living quarters right away. While I understand the rationale here, I think there are usually more pressing financial moves to be made before scaling up home base. This especially holds true if moving would result in a considerable about of added stress and expense.
Here are some helpful (and practical) financial moves to consider when planning for a new arrival. In fact, these are the exact same ones currently taking place in my life.
1) Create a baby savings account
We already have a joint bank account that covers all the household bills and a savings account earmarked as an emergency fund. Upon news of the pending newborn, we also established a dedicated savings account to cover some baby-related items we don’t yet foresee (as I’m sure there will be plenty). We’re chipping in a little each month for added peace of mind. It’s easy to set up a quality, high-yield online savings account nowadays. We use Ally and Discover for our savings because of their top notch interface and customer service.
2) Evaluate health insurance options
We will want health insurance coverage added for the newborn right away. This means that our plan needs to: 1) be aware that a dependent is on the way, and 2) have the proper benefits for a child. Children get sick early and often, so this is an area we can’t neglect.
3) Decide guardianship
Proper estate planning becomes an absolute must when a dependent/child is added to the mix. In particular, guardianship directives need to be added to the will once a baby is born. Conversations in our household are ongoing, but this will be decided before birth while we’re not entirely sleep deprived.
4) Expand life insurance coverage
Tying into point 3 above, proper protections become paramount when a little one is dependent on you. Both parents needs proper life insurance to provide for the youngster in case of a worst case scenario. Make sure to have an sufficient coverage through an affordable, top-quality provider. While I currently have ample insurance in place, we’re now in process of implementing coverage for my wife as well. And yes, you can still get life insurance while pregnant.
5) Automate bill payments and savings
When the baby arrives, it’s near certainty that there will much less quality sleep taking place in our home. Brain functionality will take a hit as a result, so the fewer decisions we need to make the better. This makes automation of tasks even more important. I thought I had all of our our bills, credit cards, savings and utilities set up on autopay, but upon review there were a couple that have fallen through the cracks. Time to shore that up.
6) Weigh college savings plan options
We know that family and friends are going to want to help in our new adventure. This usually involves the purchase of baby items and gifting of hand-me-downs. While a nice gesture, we are an intentional household that doesn’t enjoy clutter. Killing 2 birds with one stone, we plan to set up a 529 plan account for the child when born and make it easy for all to contribute. This should help alleviate the collection of unnecessary material items while providing a necessary boost to savings for higher education. The folks at College Backer (which is who we’re going to use) are making setup and contributions to a 529 plan as easy as it’s ever been.
7) Determine which credit card to add child as an authorized user
This is a brilliant move I stole from my father-in-law. Many lending institutions will allow minors to be added as an authorized user on a credit card. Doing so will give a child many years of credit history by the time they go into adulthood. This longevity will give them a one-up on their peers by boosting their credit profile. My favorite credit issuer (Chase) allows minors of any age to be added as an authorized user, so I plan to do just that. Note, just because a child is an authorized user does not mean they have to possess an actual card!
8) Prepare for open household discussions about money
OK, I’m aware that household discussions on money aren’t going to involve the child for some time. But I think it’s helpful to go ahead and start making this a practice before the little one’s arrival. I plan to make household finances a regular dinnertime topic. This will lead to fewer family money surprises (which can cause marital strive) and a more educational financial upbringing for the child. When we do end up moving and buying a home, the whole family can be in on the financial rationale and implications of the move. This should prove to be a valuable (and fun) learning experience.
Are there any tips you have in preparation of a newborn that made your life easier, or that you wish you would have done ahead of time? Please share!