According to the U.S. Department
of Agriculture, child rearing is a costly endeavor. From birth through age 17,
for middle-income households, the cost
to raise a child in 2015 was $235,670. Add in post-secondary education and
child rearing expenses, from cradle through college, can easily exceed
Conventional cash flow wisdom is
to increase income and reduce expenses to make ends meet. Having children often
results in the exact opposite scenario. Expenses increase at exactly the same
time that income either stays the same or is reduced. What to do? Below are
recommendations to consider:
Proactively- Prepare a list of anticipated expenses and calculate the total
cost. Add a “miscellaneous” category for unanticipated items. Try to pro-rate
prenatal expenses (e.g., $4,000 divided by 9 months = $445 per month) and “pay
as you go” rather than purchasing everything at once on credit.
Inexpensively- Consider making purchases at consignment and thrift shops
and garage sales for clothing and nursery equipment in good condition. Another
money-saving option is hand-me-downs from friends and family.
Employee Benefits Related to Parenting- Explore your options for parental
leave, Family and Medical Leave, maternity coverage, disability coverage, and
pediatric care. Contact your employer’s human resources department for
information and assistance.
Estate- Draft a will, or revise a previous one, to name a guardian and
back-up guardian for a newborn child. Guardians do not necessarily have to be
family members. Parents can choose anyone they feel would be best suited to
raising their child. Be sure to discuss your selection with the designated
This week, I attended the Fall American Savings Education
Council (ASEC) meeting and, via phone, part of a Consumer Financial Protection
Bureau (CFPB) meeting for financial practitioners. Below are some take-aways:
¨Four key factors
can affect worker (and dependent) health status: worker share of health
insurance premium, cost-sharing (e.g., deductibles, coinsurance, and
copayments), choice of health plan, and workplace wellness programs.
¨Nearly half of the
U.S. working population with employer health insurance is in a high-deductible
¨A study of a
large employer that replaced PPOs with a HSA (health savings account)-eligible,
high-deductible health plan (HDHP) found decreases in outpatient office visits,
prescription drug fills, and medication adherence and more emergency room
visits. Even preventive services not subject to a deductible were used less after
the HDHP started.
encourage workplace wellness by offering financial incentives such as prizes,
gift cards, and premium contributions.Prizes are often used in conjunction with health risk assessments or
¨Only 1 in 10
Americans is saving enough money to cover short-term needs and retire
comfortably. Health care expenses take a big chunk out of people’s income. Some
employers are starting to coordinate HSAs and 401(k)s.
¨Caregiving is a
threat to retirement security. For example, caregivers may have reduced work
hours and missed work days or have to quit their job. The majority of
caregivers work full- or part-time (52%) or are self-employed (8%).
savings, break goals into small steps and identify a “why” that is driving
¨Using savings that
is set aside for emergencies is not a failure. It is what the money was set
aside for! Be sure to replenish emergency savings as needed.
Many people, at all ages,
choose to live together without getting married. Unmarried partners do
not qualify for joint income tax filing or the estate tax spousal exemption.
Rather, they are treated as single individuals. In other areas of personal
finance, however, they operate like married couples. For example, there are
economies of scale (e.g., one cable bill instead of two) and the need to
jointly pay household expenses. The longer a couple lives together, the more
likely they will need to jointly make important financial and legal decisions.
Below are five financial recommendations:
Method for Bill-Paying- Consider holding separate credit cards and bank
accounts and divide household expenses evenly or proportionate to each
partner’s income. Keeping assets separate avoids the problem of becoming liable
for a partner’s debts.
Law- Check with an attorney about the impact of cohabitation on alimony and
child support from a previous marriage. State laws vary. Social Security
benefits are not affected, however, which is why some retirees
choose to live together but not marry so they won’t suffer a reduction in
benefits based on an earlier marriage.
Purchasing Joint Property Coverage- Find out if this is an option.
Insurance companies may allow this if both partners have an ownership interest
in property being insured. Many insurance companies also allow someone with
renters insurance to add a partner for less than it costs for two separate
policies. Consider increasing the coverage, however, to reflect the increased
value of both partners’ possessions.
the Fine Print- Be aware that, if both partners sign loan documents, an
apartment lease, or a contract with a utility company, both are legally
responsible for payments, even if one partner moves out.
Beneficiary Designations- Consider naming an unmarried partner as a
beneficiary on retirement plans (e.g., IRAs) and/or a life insurance policy in
the case of long-term relationships. Ditto for a will. Unlike surviving spouses
in a married couple, unmarried partners will not inherit anything automatically
through state intestacy laws if a partner dies without a will. Instead,
surviving blood relatives will receive the deceased partner’s property.
week’s post is late because I attended two conferences as a presenter and for
professional development. Below are my take-aways from the Academy of Financial
Services (AFS) and the Financial Planning Association (FPA):
About 50% of Americans own
no stock directly or indirectly through mutual funds, ETFs, or retirement
The new name for socially
responsible investing (SRI) is ESG (environmental, sustainable, governance)
investing. Investors choose ESG funds to align with their values, mitigate
risk, and impact world problems.
The highest percentage of
charitable giving is to religious organizations followed by “the needy.” Many
more people make charitable gifts during their lifetime than at death.
Money is currently no longer
the most frequent source of arguments among couples; political differences
are.Money is now the #2 stressor. When
wives earn more than their husbands, conflict about money increases.
financial stress lose 13% of their IQ (mental “bandwith) according to research
About a third (34%) of elder
abuse frauds are committed by family, friends, or neighbors. Warning signs
include unusual activity in investment accounts, changes in legal documents,
and checks made out to cash.
Many people cannot afford
multiple financial goals. What to do? Increase savings, defer some goals, fund
lower level goals (e.g., a less expensive car), and accept a lower likelihood
of success for less important goals.
Fund financial goals
concurrently, not sequentially. Otherwise, all of your financial goals will be short-term
goals in conservative investments and decades of higher return investment
growth will not be realized.
A speaker showed a picture
of a human brain and the letters “ABL,” which stand for “always be learning.”