The purpose of Money Talk is to improve readers' financial capability with research-based personal finance information.
Thursday, October 25, 2018
Financial Planning Tips for New Parents
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