8/2/2021
Author: Ben Reynolds
A baby will make love stronger, days shorter, nights longer, bankroll smaller, home happier, clothes shabbier, the past forgotten and the future worth living for.
Anonymous
Parental Peace of Mind
This blog topic came naturally to me as my wife and I welcomed our first child last month! It’s a very exciting time, and we have been doing our best to prepare by purchasing several resources to build our confidence around feeding, sleep training, safely using our car seat, and overall caring for our baby. With so much information to learn, I have appreciated brief checklists to illuminate the most important considerations. With this in mind, I wanted to share a brief checklist of financial items I’ve been thinking through in anticipation of our daughter:
- Review Life Insurance Needs: Rumor has it that kids are expensive! Life insurance can be used to replace income, payoff household debt, and fund future goals for your surviving family in the event of your unexpected death. In this event, would your spouse/partner continue working or would they take time off to cope with your family? Would your spouse/partner pivot to part-time work in order to care for your family and fulfill all household responsibilities, or would they rely on family or hired help? Money clearly cannot fill the gap of an unexpected death, but life insurance can provide peace-of-mind by alleviating financial concerns.
- Finalize/Update Basic Estate Planning Documents: We understand this is not a fun topic to discuss (especially during such an exciting time in life!), but it is extremely important. This is especially true when young children are involved, as you retain the ability to shape their direction and future by naming guardians and providing for major life events (education, weddings, first home, etc).
- Review Disability Insurance Coverage: This is often overlooked at a material risk, which is unfortunate because for most young families their income potential and longevity is the household’s largest financial asset. In light of this, protecting your income is very important. In the event of disability, this protection provides contentment that you’ll retain your current lifestyle, stay in your current home, and potentially continue saving for long-term goals. You likely have some coverage through your employer, but please review if it is insufficient to meet your monthly household expenses.
- Build Emergency Reserve Bucket: Unexpected expenses will arise. This is especially true with a growing family, so we encourage you to get ahead of this by building a comfortable Emergency Reserve bucket. Like most professionals, we recommend retaining 3-6 months’ worth of expenses in your emergency reserve bucket. A $2,000 unexpected expense will never feel good, but knowing that you can afford to pay this without creating financial strain should provide contentment and allow you to rightfully focus on the unexpected event at hand.
- Start a College Savings Fund: Regardless of what goal you are saving for, we know that starting early is fruitful over the long term. While there are several priorities competing for your cash flow (including everything on this list!), we highly recommend opening a college savings fund. Even if you do not have lots of cash flow to allocate to this account today, that’s okay! Simply opening and starting a modest monthly contribution (most 529 Plans allow for contributions as low as $25/month) will position you for long term success.
While I haven’t started a coffee habit yet, let me know if you have any questions on any of these topics – I’d be especially be glad to connect as a new dad.
Ben
