A new baby is a life changing event! Have I stated the obvious? Your home will be one of upheaval when a new baby arrives. Those idealic weeks of planning the nursery and imagining yourself holding a smiling baby will quickly give way to the reality of changing diapers, spitting up, sleepless nights, and a crying baby. I’m here to tell you that it is all worth it! I look back on those hectic early months and only remember snuggling my sweet babies in their little jammies and listening to their baby coos. It’s only when I actually skype with my sons and their new babies that I am reminded of the chaos that a baby can bring into a well ordered life. My daughter-in-law put it very simply, “I knew it would be hard in the beginning, but no one told me how much I would really love having him.”
Along with setting up the nursery, daycare, feeding schedules, car seats, baby wardrobe etc comes some other very big responsibilities. Don’t put these off. In fact, you might just want to start them before baby even arrives.
First and foremost is your will.
Who will take care of your child/children should you pass away. Don’t be silly and put this off just because you can’t face the prospect of your own mortality. Look at this as a gift to your child and the chosen guardian. I have been totally honored to be asked to step in as a guardian if the unthinkable happens for several different friends and family. I am forever grateful that I never needed to fulfill this role. But I did take special joy over the years watching these various children grow into adulthood. Don’t be afraid to change the guardian in your wills as circumstances change: i.e., a move out of state, a change in child rearing philosophy, drifting apart from old friends. I changed my will a few times as my children were growing up to ensure the best person for them at different stages of their lives.
When you choose your guardian, do not automatically list both halves of a couple. If you want Aunt Jane, then just specify Aunt Jane. Uncle Frank will be there too. Given the crazy divorce rate, no one can guarantee that your sister or brother’s marriage will last forever. You don’t want your child caught in the divorce settlement or being sent to live with an ex-partner that you haven’t seen in years.
Sometimes, the best guardian for your child’s physical and mental needs might not be the best one for their financial needs. You might consider a financial guardian, institution or a trust for this purpose. At that point, you need to determine how much money will be made available for the ongoing care of your child and at what time all the funds would be made available to your child. At 18? 21? All at once or slowly over time. I recently did the taxes for a 65 year old woman. She and her sister were each receiving $100 a month from her aunt’s estate for the past 40 years. At one time, that was a lot of money. Now it barely covered the groceries. Even after forty years have passed, they can’t change the trust. So please, don’t try to control forever from the grave.
Now is a good time to review and update your beneficiaries. Check your life insurance policies, your pensions, your 401 K’s, your IRA’s, your TOD accounts. Make sure they go to the person you want. The internet is full of stories of people who didn’t update their beneficiaries. Upon their death these assets did not go to their family and loved ones. Instead they went to an old grumpy uncle, a divorced spouse or a forgotten fling from thirty years ago. It takes only a little time to protect your family by updating your beneficiaries. Remember, whomever is listed as the beneficiary of these life insurances, pensions, IRA’s etc is the person who will actually get the money at the time of your death, regardless of what you might put in your will later.
This is also a good time to make sure you have ample life insurance to provide for your family. Both parents should have adequate life insurance whether both work or not. After all, the “bread earner” may bring home the bacon, but the stay-at-home parent provides the “daycare” and various other home duties that would otherwise have to be paid for. Competent daycare can cost upwards of $1000 a month. Consider term insurance which is substantially cheaper than whole life. You will also want it for 20 – 30 years; longer if you plan on more than one child. My own children are seven years apart. When my eldest turned twenty, my youngest was still thirteen. If my life insurance had ended after only 20 years, she would have had no financial net during all of her teen years.
You just had a baby. Are you already thinking of saving for college? Unless you have limitless funds, DO NOT INVEST in a 529! I know, this is totally opposite of what most financial advisors tell you to do, but please listen to me. Instead, you should contribute the maximum to your ROTH IRA. As long as you are married and one of you has wages, both of you can have an IRA. It is here that you will start saving for baby’s education. This is such an important topic, that I have written a whole blog entry about it. Meanwhile, trust me. Start your IRA. Now.
While we’re on the subject of IRA’s and retirement income, make sure you are taking advantage of any employer sponsored 401K. See my entry on starting 401K’s if you haven’t already begun one. Time goes fast when you have a little one. Why it was just yesterday that you were carefree and attending high school or college, and now you have a whole new person depending on you.
Speaking of work related benefits, check out any maternity or paternity leave that might be offered by your employer. Be sure baby is added to your health insurance as soon as possible. If you both are planning to return to work after baby and you need child care, consider signing up for your employer’s dependent care flexible spending plan. You will not pay (and therefor will save!) taxes on money set aside and used for qualified daycare expenses. This works the same as flexible savings accounts for health care, another work related benefit you should consider using.
With all this financial talk, let’s not forget the baby! Ever! I’ve heard too many horror stories of children forgotten in a hot car. Strap your purse, your briefcase, your lunchbox, whatever! in the back with your baby. We might forget we were supposed to drop a sleeping baby off, but I don’t know too many who will forget their purse when they leave the car. For the more technological, they even make gadgets that will beep if you get too far from a car seat. Remember: Protect my grandbabies at all times!