Baby on the Way? Here’s How You Can Prepare Financially

By Bennett Whitlock

Welcoming a child is an incredibly exciting time in your life. As you prepare for your new addition, it can be challenging to know where to start financially. As you plan to welcome your first, second or even fifth child, consider the seven tips below, which can help you determine how to provide your family with the lifestyle you desire.

Re-evaluate your career. The arrival of a new child may cause you to think differently about your career goals. Perhaps you want to earn a promotion, seek a job with a higher salary or better benefits, or pursue continuing education. Maybe you or your spouse are ready to reduce your hours or become a stay-at-home parent. If you are thinking about changing your job status, evaluate how the move may affect your paycheck, retirement savings and benefits.

Think about lifestyle changes. How will your baby impact your day-to-day activities? Incorporate the cost of family outings and increased expenses into your budget to avoid surprises. Keep in mind that supporting your children in their hobbies, such as a traveling soccer team, music lessons or private coaching, may take additional investment. If your ideal lifestyle involves a new car or home, consult a financial professional about the pros and cons of making the move today – or further down the road.

Consider childcare expenses. According to Care.com, close to one-third of parents spend 20 percent or more of their income on childcare. And this cost is on the rise. In some U.S. states the cost for one year of care can be more than one year of college.¹ So, whether you choose daycare, a nanny, an au pair, an afterschool sitter or a combination of options, make planning for this expense a priority.

Prepare for tuition. While the cost of childcare may decrease if you choose to send your child to public school, private elementary or secondary school often comes with a price tag. Furthermore, the cost of college continues to rise at a pace faster than inflation. Tax reform expanded the use of 529 plans, a saving option most commonly used for higher education expenses. You may now withdraw up to $10,000 federal income tax-free per beneficiary, per year to pay for kindergarten through 12^th grade tuition at a public, private or religious school. And, if funding college tuition is important to you, know it’s never too early to start saving.

Reassess your financial position. Unexpected events can affect your finances at any time. Resolve to build or maintain an emergency fund that could cover three to six months of expenses, in addition to prioritizing your retirement savings. After your baby arrives, update your estate plan and insurance coverage (e.g., medical, life, disability policies) as necessary.

Ponder family values. Start thinking about how you want to teach your child about financial responsibility. Will you give him or her an allowance? What is your vision for giving birthday presents, holiday gifts, vacation souvenirs and other items to your child? What money values do you want to pass down? Being intentional early can help set clear expectations and ensure you and your spouse are on the same page.

Plan for your family bucket list. Many parents dream of showing their children new places and allowing them to have a variety of experiences. Think about what activities matter to you and incorporate them into your financial plan. Taking an annual vacation, owning a vacation home, buying season tickets to your favorite team or purchasing a boat are common goals for many families.

Expanding your family often has a way of putting your priorities into perspective. If you would like an objective opinion on how to best plan for your goals, talk with a financial advisor in your area.

¹– Bugbee, Katie. “How much does childcare cost?” Care.com, March 28, 2018. care.com/c/stories/2423/how-much-does-child-care-cost/

Bennett C. Whitlock III, CRPC^®, is a Private Wealth Advisor and Managing Director with Whitlock Wealth Management, a private wealth advisory practice of Ameriprise Financial Services, Inc. He offers fee-based financial planning and asset management strategies and has been in practice for 22 years. To contact him call 703.492.7732 or visit his website at whitlockwealth.com, 12848 Harbor Dr., Suite 101 Lake Ridge, VA 22192.

Ameriprise Financial Services, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.

Ameriprise Financial Services, Inc. Member FINRA and SIPC.