Four Financial Changes For When You Have a Baby

If you’re a regular reader, you’re probably well aware that there is a baby about to enter my life. (A baby who, technically, should have been here last Wednesday, but we’re not going to get into that right now.) With such a big change in our lives coming, Sondra and I have spent much of the past few weeks getting ready for the new arrival, doing everything from setting up cribs and bassinets to making sure that our house is clean and child-safe.

There are other changes that need to be made, though; specifically, with a new baby comes new financial needs and responsibilities. The way you have your finances organized changes when you go from a family of two (or one, if you are a single parent) to three (or two). There’s many things that you need to do, and which I am currently doing, to get your financial situation in order for a new arrival. Let’s look at:

Four Financial Changes For When You Have a Baby

1. Consider Investing in a 529 Plan: In modern day society, college has become all but necessary in order to get a decent job. (Heck, I’ve had to go to grad school to have a shot at any but the most entry-level of jobs in my field.) If you want to help your child to pay for college, investing via a 529 plan is a good place to start. It gives you a chance to ensure that your child will have at least some money to go to college when the time comes. (Just make sure you aren’t cutting down your retirement investments to make the 529 investments; the last thing your child will want is the need to provide for you when you

2. Updating Your Will: I realize it’s not the sort of thing you want to think about when you have a new baby, but if something happens to you and/or your spouse, you want to make sure that your baby will be provided for. Ensuring that your will is up to date (and that you have a will, if you haven’t yet written one out) will help to make sure that your little one will be taken care of, preferably by someone who you support and trust. Unfortunately, in our increasingly complex legal system, a will doesn’t always ensure that your belongings end up in the hands of those you want, so you should probably…

3. Consider a Trust: What is a trust? In layman’s terms, it’s a legal entity that holds possession of your property and manages it for the benefit of another, be that your spouse, your parents, or yes, your child(ren). This helps to ensure that your investments and other property ends up in the hands of your children, rather than being passed to someone else (say, a new spouse if you happen to die and your husband or wife gets remarried). Trusts do have plenty of advantages in that respect, but tend to be rather complex, as well as costing more than a little bit to create and manage. Still, if you are well-off, it is worthy of some consideration.

4. Get (or Add to) a Life Insurance Policy: On the subject of things to have in place should you die, you want to have a life insurance policy ready should you pass on, particularly if you are the major (or only) income producer in your household. That way, whomever is caring for your children upon your death will have plenty of money to provide for them and your children when you pass on. You should probably have a term policy (as I’ve discussed before), although if you have a whole life policy already, you should compare the costs before changing. Either way, ensuring that you are providing at least five to ten years’ worth of income to your family should be your goal.

While we’re on the subject, you should be sure to get a sizable life insurance policy for the non-working or lower earning spouse, as well. Although you might not think you need to have as large an insurance policy, it’s worth considering the mental state you will be in after he or she dies. Even if you are the higher earner, you are likely to be stricken with grief for a very long time, many months or even years, and unable to work for that period. Having a healthy amount of money to live off of while you (or your spouse, if you are the lower earner) recover is a smart plan. (Similarly, you might want to consider a life insurance plan for your child; not a ‘Gerber grow-up plan or anything like that, but a serious, six-figure term plan, to provide for you and your spouse if you end up grieving for years upon your child’s death.)

There you go, a few changes to consider when you have a new baby, to ensure that they have a good life (and will be provided for, in case you die). Any more suggestions for financial changes to make?


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