Q&A - Having Children

Question: Justin – We are planning to start trying to have a child in the next few months. What financial topics should we be thinking about that weren’t as critical before?

Answer: There are four main things that become much more important when you decide to start trying or have a baby on the way.

1) Preparing for the cost of daycare or the decrease in one parent’s income
After parental leave has been used, most families will either start paying for daycare or one parent will stop working, so either expenses go up or income goes down. You don’t want to wait until the baby arrives to figure out how to make this work. If you can decrease your spending and increase your short-term cash savings now it will go a long way to helping with this financial transition.

2) Needing a will
I’m not saying people without kids don’t need a will, but in my opinion a will becomes a mandatory requirement once you have a child. You need to establish who you want to be the guardian for your child in a legal document. Having a conversation with that person is not good enough. Physical and financial guardianship needs to be in a will.

3) Term life insurance
Another morbid topic along with #2 above, but I look at parenthood as (at minimum) a two-decade financial commitment to help launch your child into adulthood. Finding the most cost-efficient term life insurance before getting pregnant is often a good idea.

4) Saving for educational costs
Probably not as immediately time sensitive as the other three points above, but still important. If as a parent you want to be able to help your child with their higher education costs, the earlier you start investing for college the more time you have for that money to grow.