Sunday, December 17, 2006
You've picked out a name, the nursery colors, and even put your baby -- still in utero -- on waiting lists at day-care providers.
Yet if you are like many expectant parents, those nesting instincts have probably not included attention to the family nest egg -- even though the household budget is about to take a big, long-term hit. The government estimates that for a family with an average annual income of $57,400, raising a child from birth to 17 years old can cost about $190,000, and that does not include paying for college.
Parents-to-be may not believe it, but that busy period before the baby arrives is the most time that they will have during the next few years to settle such critical matters as creating a will or buying life insurance. After the baby comes, such considerations can quickly be pushed aside amid the jumbled fog of diaper changes, feedings and sleepless nights.
"You can choose a plan for the family or you can choose to just let things happen and then operate in panic mode" said Judy Redpath, a financial planner in Reston.
In a survey last year, about four in 10 expectant mothers said they didn't adjust their family budgets to include the new baby. About seven in 10 said they hadn't reviewed their health benefits, according to the poll of 500 mothers by Aetna and the Financial Planning Association.
Financial planners and family counselors say that expectant parents should review their short-term and long-term strategies and prepare for the possibility, however remote, that both parents may die before that child reaches adulthood.
"Take the time to discuss all these things as a couple so you are on the same page," said Jennifer Martin Ryder, a Rockville resident who planned extensively with her husband before their first child was born. "And revisit the discussion on occasion to make sure you are on track with what you had decided."
Make a List, Check It Twice
Soon after Jennifer and John Ryder learned they were having a baby, they took off for a weekend trip to Ocean City, Md., to hash out a long-term financial strategy. They began with the big questions: Would one parent cut back on work? What were their educational goals for their children?
Jennifer, 38, wanted to take off at least one year from work after the birth of their daughter, Kathleen, who is now 11 months. They also wanted to move to a desirable school district.
With these considerations in mind, the Ryders came back from the weekend with a to-do list. They decided to look for a home in Rockville, where they wanted their daughter to attend public school. Jennifer would start saving half of her salary each month from her job as a speech pathologist to create a cushion of savings to cover any unexpected expenses after the birth. They decided to boost their life insurance and disability insurance and pay off student loans and car debt to start off parenthood debt-free.
In the months leading to the birth of Kathleen, the Ryders crossed off items on their list. The couple is now thinking about having a second child, and they plan to schedule another weekend getaway to again revise their household budget and revisit their long-term financial strategy.
"For us, the budgeting of smaller items like diapers and wipes was not as important as figuring out what our priorities were and taking care of the big financial choices," Jennifer said. "Once we took care of those big chores, everything else fell into place."