New York City, NY (PRWEB) August 17, 2004
As a brand new dad, I know how stressful it can be to get ready for the arrival of a baby. Since it helps to get perspectives from people who've been in your shoes, we asked parents in the Armchair Millionaire community about how they did it. Here's just a little of what we heard:
"The most important thing to do once your child is born is figure out your educational priorities and begin planning for them. This can include savings for private school, college, graduate and professional studies. And may also include relocating to an area with better schools or in closer proximity to the schools you want your child to attend." --Kent
"As soon as we knew we were having a baby, we increased our savings to cover the maternity leave. On January 1, I updated my withholding to include the upcoming dependent. As soon as the baby was born, we started saving for day care, even though she was home with mom for three months. That reduced the weekly amount that would be withheld. We covered the three months that my wife was off with a combination of paid time off, savings and reduced discretionary spending." --Robin
The U.S. Department of Agriculture estimates that it costs the average middle-class family just under $180,000 to raise a child from birth to age 18 (and that doesn't even begin to touch the cost of college, which could bring the total beyond $300,000). Figures like that can be overwhelming, so I find that's it's easier to break down your approach into manageable steps. My guide provides the most important ones.
The Armchair Millionaire's Checklist for Financially Preparing for a Baby
Get life and disability insurance. The breadwinner (or breadwinners, if both partners work) of the family should have term life insurance that will effectively replace their income and provide for college. Likewise, you should have disability insurance that will replace your income in the event that illness or accident prevents you from working.
Check your health insurance. Find out if you can add the baby to your or your spouse's health insurance policy. Know exactly what it will cover (such as prenatal care, labor and delivery) and plan for the expenses that will not be covered.
Check your benefits at work. Find out about your and your spouse's family leave policy. Ask about any other benefits for parents, such as education assistance or on-site day care. And don't forget to inquire about flexible spending accounts, which allow you to pay for a whole range of medical and day-care expenses for your child while taking a major dent out of your taxes.
Start saving for college. College seems like a million miles away at this point, but this is actually the best time to start saving for it. Why? Because compounding will pack a powerful punch when you get started so soon. Just a hundred bucks a month and an average annual growth rate of 9 percent works out to nearly $50,000 by the time your child turns 18--plenty to tackle those tuition costs. Take advantage of the tax breaks available, starting with the one I consider to be the best--a 529 plan.
Resolve any financial conflicts. Having a baby is stressful enough--the last thing you and your spouse need are conflicts over money. If you haven't already, take the time needed to firmly agree on your spending priorities and long-term financial goals. A family budget could be just the thing for keeping you both on track.
THE BOTTOM LINE: When a baby's on the way, decorating the nursery should actually be the least of your worries. Get your financial ducks in a row so that you can really enjoy that newest (and cutest) member of the family.
THE ARMCHAIR MILLIONAIRE WEEKLY SURVEY: High-powered jobs pay high-powered salaries--but is the money worth the sacrifices? Log on to http://www.armchairmillionaire.com and let us know.
Lewis Schiff is a contributor to CNNfnMoney.com, the Web sites for CNN and Money Magazine. His newest report, "How to Know When You Are Rich," is now available at http://www.armchairmillionaire.com.
# # #