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Major life transitions are often the best time to reach out to your clients—and the adult children of your clients—to help them prepare for change. The birth of a first child is among the most significant of those transitions, ushering in a new world of responsibilities for the new parents. Of course, diapers and sleep schedules are just the beginning. Now is the time to put a plan in place to protect the whole family—especially the precious little one who has just come into the picture.
The best thing you can do to help is offer simple, sound guidance right away, and then check back in a few months down the road once everyone is settled into their new routine as a family. One suggestion: ask if you can drop off a home-cooked meal so they can sneak in a few minutes of down time, and include a note with these five basic financial tips for the new parents. Be clear that you understand they may be overwhelmed, but that when they’re ready, you are here to help.
1. Rethink your budget
It’s amazing that such a little baby can have such a big impact on your finances! A month ago you were out buying clothing, baby furniture, and an amazing assortment of necessary baby gear. Now diapers, day care, and doctor’s visits top your list of expenses, and all those new costs can add up fast. Establishing a new, realistic budget can help you stay in control of spending and make your cash flow—including a precious night out alone with your partner every now and then—one less thing to worry about.
2. Draft or update your will
Now that you have a child, a will is a must-have. Not only does your will ensure your assets are efficiently transferred to your heirs should you experience a tragedy, but it also designates who you want to care for your child if anything should happen to both parents. Of course, be sure to discuss this important responsibility with whomever you choose as your child’s guardian, including how they would raise your child in your absence. It’s not an easy conversation to have, but it’s an important part of your new role as a caring and responsible parent. Consider a Trust as well to ensure your assets are managed and distributed in a way that ensures your child is cared for—always.
3. Review your insurance coverage
Your child will depend on you and your income for many years to come. Proper insurance helps protect your lifestyle today, and maintain that lifestyle if anything happens to you before your child is an adult. Life insurance helps replace lost income and the cost of childcare if anything happens to one or both parents, while disability insurance helps replace your income if you’re unable to work due to illness or injury. Be sure to update your beneficiaries on all policies, and don’t forget to add your child to your health insurance plan within 30 days to be sure there’s no lapse in coverage. (With all those new baby check ups, that insurance is key!)
4. Replenish your emergency fund
Unexpected expenses are a reality now that you have a family to care for, and they usually surface at the most inconvenient times. If you are already in the habit of setting aside money for a rainy day, you should focus on increasing your emergency fund. Aim to have at least six months of living expenses set aside in an accessible account, and when the unexpected does come your way, you’ll be able to focus on your family instead of worrying about paying the bills.
5. Revisit your investment plan
With a new baby in the house, your retirement may feel very far away, but planning for your own future is part of caring for your family. Be sure to continue contributions to your retirement plan, and check and update the beneficiary designations on your retirement plans and investment accounts. If you name your child as a beneficiary, you must also name an adult trustee. Now is also the time to start saving for your child’s education—your baby’s college years will be here before you can blink!
Planning for your future can feel like an overwhelming task, especially now that you’ve added a new baby to the equation. For now, focus on the basics: take great care of your baby, and be sure you have your basic budget covered. And as soon as you can, I’m happy to schedule some time to walk through the rest. Together, we can work to put a plan in place that gives you—and your entire family—a path toward financial security for years to come.
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Disclosure:The information and opinions herein are for general information use only. The opinions reflect those of the writers but not necessarily those of New York Life Investment Management LLC (NYLIM). NYLIM does not guarantee their accuracy or completeness, nor does New York Life Investment Management LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are not intended as an offer or solicitation with respect to the purchase or sale of any security or as personalized investment advice.