“On the night you were born, the moon shone with such wonder that the stars peeked in to see you and the night wind whispered, ‘Life will never be the same’.”
Author Nancy Tillman aptly describes the moment anyone becomes a parent – life is never the same. You spend months trying to prepare: reading, researching, organizing a bedroom, stockpiling supplies, etc. Then your child arrives, and you start the process of settling into a new normal. As Patti Black likes to say, life is “exary” – exciting and scary! You are establishing new routines, functioning on little sleep, and enjoying the awe and wonder a little one brings.
In the midst of these rapid-fire changes, it is hard to focus on much else. But, below are three to-do’s every new parent should consider.
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Meet with an attorney to draft (or update) your estate documents.
While it is heartbreaking to think about after such a joyous occasion, consider what you would like to occur if you are gone or are no longer able to care for your child. Who would you want to care for your child in your place? Many people delay drafting their estate documents because they simply cannot choose a guardian. And the truth is, no one can replace you! But, if you delay naming a guardian, simply because you cannot decide who would be the best, it is important to know that the courts will decide for you.
Before meeting with an attorney, ask yourself these questions. In the event of a tragedy, where no parent remains, who would I want to care for my child, and who would I want to manage financial assets for my child? This caretaker can be the same person(s) or a different person(s).
At a minimum, you should have a Will, Power of Attorney, and Healthcare Directive. While we always hope your “best plan” never gets put into place, your decisions are better than the courts.
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Review your life insurance needs.
Life insurance should be utilized to meet financial needs. Prior to children, your most significant need may be to simply pay off debt. With the arrival of a child, a substantial loss of income may result as you now have someone else who depends on you. Additionally, you may wish to cover other expenses, such as college education.
Consider these questions: What annual income would need to be replaced in the event of my death, and for how long? What are my debt balances? How much money would it take to cover my child’s college education?
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There is no better time than today to start preparing for tomorrow.
Establish an emergency fund. Build cash and set aside 3 to 6 months of expenses in a savings account. In the event of a sudden job loss, home or vehicle repair, or medical emergency, access to quick cash cannot be underestimated.
Take advantage of any 401(k) match. Money may not grow on trees, but it can feel like it when you see 50%, or even 100%, of your contribution added to your retirement account. When 401(k) contributions or employer matching is offered, don’t pass up the opportunity.
Enhance your child’s future. Many parents want their child(ren) to have a firm foundation when setting out on their own. This foundation can be built by multiple approaches, such as saving to a 529 plan for college education expenses and setting aside funds in a taxable account for other goals, like assisting with a down payment for your child’s first home. These different approaches give you the flexibility to adjust as needs and goals change.
The early years are full of sleepless nights. By checking these to-do’s, you can at least rest easy knowing you have a financial plan in place.
This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.