Babies, Babies, and More Babies!

by | Mar 1, 2019 | Our 2 Cents

Many parents will say something like, “my kids are the best thing that’s happened to me” or “my children are the greatest blessing in my life”. While those statements are certainly true, an honest parent will talk about the stress, sleepless nights, and feelings of insecurity that also come with the territory of raising children. Like any good thing in life, raising children to become people of character takes a great deal of hard work and intentionality on the part of the parent. This truth applies to personal finances as well. 

Another common saying among parents is that they would do anything for their kids. Anything to protect them, guide them, and help their children avoid the pitfalls of life. However, in the world of finances, we find that parents are often missing several critical steps when having a child. Steps LIKE: 

1) Get Term Life Insurance – Anytime a child is born, the life insurance needs of the family need to be reviewed. One major point of life insurance is to provide protection for the family in the unfortunate event of a death and loss of income. Term life insurance makes sense for a couple of reasons: a) it’s typically far less expensive than whole life insurance so the bang for your buck is better, which means… b) people will be more likely to actually buy the appropriate amount since it costs less. And how much should you get?Experts recommend 10–12 times your annual income plus your current debt.When having a baby, this is even more important because child care costs have risen drastically in recent years. Day care costs alone can break the bank. These additional costs mean that even if a parent is a homemaker and does not have an income, they still need coverage. Many believe that they have adequate insurance through work. That may be true while you’reemployed at the company, but once you leave your employer, you typically lose those benefits. Having your own personal term insurance policy is critical. Getting life insurance ensures the family’s financial needs will continue to be met; in particular, the current and future needs of the new baby.

2) Estate Planning – A part of responsible financial planning is making sure your family will be taken care of in the unlikely event of an early death. This is where estate planning comes in. Having updated wills and powers of attorney can ensure your financial and personal wishes will be met. Why is this important when it comes to children? Should the parents pass away early, many states allow for children to inherit family assets at either the age of 18 or 21. This has the potential to be more of a curse than a blessing to some children. Appropriate beneficiary titling is critical; please consult your estate planner or attorney. A will can allow for the establishment of a trust that can provide estate benefits to children in a more controlled manner when the children are a bit older. This document is also critical in establishing who will actually raise your children if you pass away. For people with an unstable family background, this is most important.

3) 529 Education Plans – There is an epidemic of student loans out there that are crushing people’s goals and dreams. A 529 investment account is a fantastic way to save money for college needs with tax advantages allowing you to save your children from the perils of student loans. To sweeten the pot, new tax law changes also provide some benefits for elementary and secondary schooling. This type of account allows the investment earnings to come out tax-free provided the money is used for approved education costs.Why is this important? According to, the average increase in college costs over the last 10 years was 5% annually. This is more than double the national rate of inflation. Translation: saving for this massively growing expense in a bank account likely won’t cut it, and you’ll need all the tax breaks you can get. 

“Before investing, the investor should consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan.”