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A Financial Checklist for Expecting Parents

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Kids are priceless, but pricey too. The practical side of parenting can seem unimportant with all the joy parenthood brings. Nevertheless, financial planning is an essential part of our responsibility as parents and spouses. Here is a checklist for expecting parents:

1. Assess your financial situation with regard to income (after taxes), expenses, assets, and liabilities. This “balance sheet” will give you a good feel for your collective financial situation and help position your priorities.

2. Update your budget to reflect projected changes in income and expenses. In particular:

  • Housing costs: many times babies prompt a move for more space, better neighborhood, better school district, and so forth.
  • Food, clothing, and other household expenses: diapers and formula (you may use some even if you’re breast-feeding) are very expensive, adding one hundred dollars or more to your monthly grocery bill. You’ll spend a lot initially to buy essentials for your child on strollers, bouncy seats, cribs, etc.
  • Health-care expenses: you’ll probably pay a co-payment for trips to the pediatrician unless your health insurance plan covers 100 percent of well-baby care. Many health plans only cover only a percentage of health care expenses (seventy to ninety percent).
  • Childcare expenses: whether you look for full-time day care or hire an occasional baby-sitter, you need to plan for the impact this will have on your budget.
  • Temporary or permanent reduction in income if a parent chooses to stay with the child rather than work outside the home.

3. Review life insurance information. The more people who depend on your income while you are alive, the more life insurance you should own. If you died today with insufficient or no insurance, your mate could be forced to give up the residence or lifestyle for which you have both worked. When there are children involved, the loss of one breadwinner could mean a setback in the daily way of life, not to mention any plans for private school or college.

4. Review employee healthcare benefits, specifically maternity coverage. Make sure you understand your deductibles, your co-payments, and whether your policy covers testing, emergency care, and all the costs of delivery. Find out how long you will be able to stay in the hospital once you’ve been admitted for delivery, and whether your choice of doctors is limited. If both you and your partner are covered by or eligible for coverage under an employer-sponsored policy, you will need to decide which policy offers the best (or most cost-effective) family coverage.

5. Set aside an emergency reserve account equal to at least three to six months’ worth of living expenses. This money should be set aside solely to cover critical, unexpected needs, such as a sudden loss of income. Consequently, it is not a fund for meeting anticipated expenses, large or small, such as real estate taxes, tuition, or a spontaneous vacation (tempting as that might be).

6. Update beneficiary choices for retirement accounts. You might want to add children as contingent beneficiaries to your IRAs and 401k accounts. If something should happen to both parents, this will name the child beneficiary and prevent some headaches with your estate.

7. Execute or update a valid will. As competitive as grandparents can be about time spent with grandchildren, imagine how they might act in a custody battle with the in-laws. Head this off at the pass and choose a guardian.


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