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Josey Miller
FiLife Contributor

Financially Prepared for Parenthood? 3 Essential Pre-Baby Steps


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When you’re having a baby, questions abound: Will the child have your green eyes? Will he or she be a scientist, a musician, a teacher? Then the daydreaming hits the hard brick wall of reality: How will you manage to financially support another human being for the next 18+ years? Don’t panic."Just prepare for new expenses — diapers, formula, baby clothes and, of course, the future — while you aren’t sleep-deprived," says F. John Deyeso III, CFP, of Financial Filosophy. Start with these three pre-baby steps to ensure a smooth transition:

  1. Open a 529 (Tax-Advantaged) College Savings Account

    Let’s be clear: Saving for your retirement trumps saving for your child’s college education. So, unless you’re maxing out your retirement contributions, you shouldn’t fund the account yourself. "Open one to house gifts of cash that your newborn receives this year and until college," says Jean Chatzky, Today show financial editor and author of The Difference. And every little bit will help, says WISE Financial Group, Inc. president Chris L. Self: "The cost of a college education is expected to more than triple over the next 18 years."

  2. Buy Life Insurance

    Once you have dependents, life insurance is vital. But, rather than a permanent life insurance plan, Chatzky recommends this less expensive formula: "Calculate how much income you’d need to replace and for how long. Tack on the price of paying off your mortgage and college tuition if you’d like the ability to cover those, as well. Then shop for a 20-year level term life policy." Self adds that you should insure both parents for a minimum of $100K per year, even if one stays at home: "Think about the additional cost to pay for housekeeping, cooking, carpooler, overnight stays if the surviving parent travels for work and so on," she says.

  3. Start Living on One Income… Now

    It’s important to know your family can live comfortably on one income. So, during the pregnancy, make the adjustments to your lifestyle that would make it possible. "Many parents plan to return to work, but ultimately do not. Plus, in the current job market, no one has a guarantee," Self says. "Learning to live on one income can help guard against the unexpected." And that’s not the only benefit, Chatzky explains: "Not only will this teach you whether or not you can do it, but you can bank the remaining salary and start parenthood with a substantial nest egg."

Two other pre-baby financial checklist items to consider? Creating a will and choosing guardians. "An astonishing number of new parents haven’t done that," says Chatzky.

More Resources:

Josey Miller is a NYC-based freelance writer. Her recent writing credits include Glamour.com, Concierge.com, iVillage.com, TimelyDemise.com and TheKnot.com, among others.  The former on-camera host of an iVillage-NBC Universal weekly video series, she's appeared on MSNBC Live, Fox News Live, WNBC Live at Five, Good Day New York, on countless radio shows nationwide, including Sirius satellite radio, and more--and she's been quoted in numerous publications, including the Wall Street Journal and the Chicago Sun-Times.  Josey is also a singer, a voice-over artist, and an animal rescue volunteer. Read more about her here: http://joseymiller.com


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Rahwa Asmerom
FiLife Contributor

Creating and maintaining a will is super important!!

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Aaron Shaw
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you mentioned life insurance, what about medical insurance? Is this not a projection to scope when the expectation of children is at play?

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