If you find yourself pregnant, congratulations! Now let’s talk finances. (See that suave transition, there?) Following are The Basics of what you need to think about if you’re about to have a kid.
This is simply an overview, to get you thinking about the things that you should do before baby comes. Because Lord knows you won’t have the time or wits to do it once baby’s here. (It’s just possible there’s a bit of transference going on here.)
Cash. And Maybe Some More Cash.
Yep, having babies is expensive. Hospital bills, reduced income during your parental leave, all sorts of equipment and supplies, childcare…you can certainly make a good estimate of how much it’ll all cost, but you’ll be wrong. Close, if you’re lucky, but wrong.
That’s why I like a niiiice big cash cushion to see you through the first 6 months or so of your child’s life. 6 months is mostly arbitrary, but it’s long enough to get you through those initial weeks of adjusting to parenthood, then re-entry into your job or hell, deciding not to re-enter your job. The cash gives you time to figure stuff out.
Think About New Expenses
Let’s ignore the high, but one-time costs (hopefully) of hospital/birthing center bills and a new crib, etc., etc. Mostly I’m talking about childcare. Either you stay at home with your kid (and the cost is your foregone income) or you return to work and pay for childcare. If you’re in a tech hub like the Bay Area or Seattle or New York, childcare is expensive. And in this industry, you’re probably pretty likely to have moved away from where your parents (now, The Grandparents) live, so you likely can’t rely on them for free help (“free” but for the psychic cost, of course).
How much does childcare cost where you live? How does that fit into your household cash flow? Do you have to change other things you spend money on?
Understanding Parental Leave from Your Company
But don’t stop there. Figure out what your company offers. It strikes me that companies are sloooowly figuring out that offering family-friendly benefits is a good way to keep loyal workers. Google, for example, offers this: “up to 12 weeks of paid leave at approximately 100% of their take-home pay” for new parents, in a benefits booklet I recently saw from a client of mine. What does your company offer?
Please Don’t Start Saving for College Yet
Look, some of you out there will be able to save for college at the same time you’re saving for your own retirement, and saving for a rainy day (aka, the next Dot Com Bust), and saving to your Opportunities bucket so you’ll have choices for your future and not be shackled to your job if you don’t want to be.
And I think you’ll only know that once you have your baby and adjust to the new financial reality that is Life With Baby. And if this is the case for you, fantastic, I myself am a huge fan of higher education.
But many of you will not be able to do that, and it’s not the end of the world. I dedicated an entire blog post to how you can save other than to a dedicated college savings account. You can still save money for college but in a way that gives you more flexibility with that money in case is needed elsewhere in your life. Also, I hear grandparents, aunts, and uncles are total suckers for college savings.
Once you put money into a college savings 529 account, you cannot easily get it out. So, be sure you’ve figured out the rest of your finances before you make moves that aren’t easy to undo.
Get Yerself a Guardian
Estate Planning (capital E, capital P) often involves a whole bunch of documents and potentially fancy instruments to protect this and control that. For you, my dear pregnant person, perhaps the single most important thing to accomplish with your estate planning is to designate a guardian, which happens in your Last Will and Testament.
To put it bluntly, “Who will take care of your child if you die?” Yes, superdy dooper uncomfortable to think about. But can you think of anything more important? If you have a partner in this adventure, this will likely be a challenging conversation to have. But hell, you’re about to become parents! Everything else pretty much pales by comparison.
Now if you’re making a will, it might be a fine opportunity to get the whole suite of estate planning documents (powers of attorney, healthcare directive, likely a living trust if you live in California), but kid-wise, the will is likely most important.
Myself, I also wanted to draft some Powers of Attorney before I entered the hospital to have a separate creature yanked from my body, you know, in case anything went wrong. My husband would at least be able to make decisions on my behalf.
Consult your friendly neighborhood estate planning attorney.
If you die, anyone who depends on your income, like, say, your child, will no longer have that income to live on. Enter life insurance, which makes sure your dependents have the money they need.
You’ll likely want term life insurance for something like 20 or 30 years. Remember that some insurance is better than none, so if getting a lot of insurance is too expensive, then reduce the coverage amount or the term and try to bump it up later. Term life insurance is basically a commodity…prices shouldn’t vary all that much from provider to provider, but do shop around.
As a former pregnant woman myself, I can tell you from my experience that getting life insurance as pregnant woman might not get you the ideal rates. I was maybe 7 months pregnant when I got my policy, and I was considered overweight for my height, so I didn’t get the best health classification. Silly, but there it is. So, I simply bought a slightly overpriced, short-term policy and then replaced it after birth when I was back to normal-ish weight.
Oh, and one last thing: tech companies give us wonderful employee benefits, probably including inexpensive (or even free!) life insurance. But I want you to have a private insurance policy. Why? Because if you leave your job, for whatever reason, you lose your life insurance. And then you have to buy a new policy. At that point, you’re older (more expensive to insure), you might have developed a health problem by then (more expensive to insure), and it’s a pain to have to shop for life insurance at the same time you’re dealing with the loss of a job.
There’s a bunch of stuff I haven’t talked about—preparing yourself emotionally to become a parent, preparing to re-enter the workforce after having the child, how to tell your employer when you are pregnant—that is really, really important. I’m just not particularly expert at those things. For example, my “prepare yourself emotionally” advice is “Ha! Like that’s even possible.” See? Not helpful.
So, congratulations! And Go with God! And good luck!
Are you pregnant? Do you want to get your financial life together before Baby Takes Over? Do you want to make sure you and your family are protected? Reach out to me at firstname.lastname@example.org or schedule a free consultation.
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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.