A new arrival to the family is something that parents face with a lot of anticipation. Sometimes the event is fraught with a certain level of anxiety, as well. There are a lot of things that need to be taken into consideration materially, physically, emotionally and, of course, financially.
We think most experts would agree that thoughtful planning on as many of these fronts as can be done is a wise move. Estimates from the federal government say that raising a child is not cheap. Data suggests that the cost of a child born into the average family in 2013 will run nearly $250,000. That doesn't count college.
Savvy Pennsylvania parents know that higher education is a huge expense today. But who knows what it's going to cost 18 years from now? So where should the planning begin? Here's the thinking from one financial advisor.
- Estimate day-to-day needs. Housing and transportation are probably already part of the budget, but what about other basics? You'll want to figure out what the cost of diapers and food will be. If you both work, what will day care cost?
- Adjust your insurance. You might already be in the family plan for health insurance. Maybe not. Find the plan that provides the best coverage for the least out-of-pocket cost and make sure the baby is added as soon as he or she arrives. Life insurance on each parent should be enough to cover paying off home loans, debts and child care. You might want to bulk it up to cover your child's anticipated education costs, including college. Disability insurance on the parents should be considered, too.
- Create your estate plan. Not only does this allow you to protect your assets for your offspring through a will and perhaps the creation of a trust fund; it's your means of designating who will take care of your child if you can't. Without that designation, the decision will be left to the state.
College shouldn't be overlooked, but this can be addressed by starting a savings plan. A 529 account is easy to open and has built-in tax advantages. It can be funded with a monthly contribution and by gifts from relatives and friends.
With good planning the anxiety-anticipation scales stand a better chance of being tipped in favor of the latter.