How I'm Planning for Our First Child (and How You Can Too)

55% of millennials & Gen Z plan to have children.

I'm part of that group as my wife is having our first child later this year.

While planning for a baby is extremely exciting, it comes with a lot of changes both in your life & your finances.

Here’s step-by-step what you need to do and what we are doing:

1) Update your life insurance

With a spouse and baby relying on you, you need to get life insurance in place.

I know, I know, you have 1x your salary through work, but that is not anywhere close to enough. You need enough coverage to:

• Replace income for 10-20 years
• Pay off debt
• Help cover future education
• Your funeral
• Etc.

Make sure you have enough to cover everything you would want it to cover.

And getting it outside of work is key. If you're fired or leave your job, it does not come with you, and who knows what your age and health look like then.

You want an independent policy that stays with you and ensures you have enough coverage for as long as you need it for.

2) Get an estate plan in place or update yours

You've needed an estate plan for a while now, yet you've pushed it off.

Now that you have a child coming into this world, you NEED one.

This could be:

• Will or revocable trust with pour over will
• Health care directive
• Financial power of attorney
• Guardians picked

If anything were to happen, you want this all decided and mapped out for you so the courts do not decide. Stop pushing this off.

3) Look at your budget

Babies can either add a few hundred dollars a month to your budget or thousands.

• What are your plans?
• Do you plan to have one spouse stay at home?
• Do you plan to do daycare or have a nanny?
• How often do you plan to go out and what will a babysitter cost?

Take a look at how all this will impact your budget and make decisions from there.

4) Increase your emergency fund

With babies comes more expenses. This means your monthly expenses are higher and your emergency fund needs to reflect that.

Build this up to be in an even stronger position so you can handle whatever comes your way.

5) Save for certain one time costs of the baby

Now that you have a baby on the way, you might need:

• Stuff for the nursery: crib, dresser, etc.
• Stroller, car seat
• Maybe a bigger car

Map this all out and save for each of these. Be wise and only spend what you can afford to spend.

It's easy to overspend here and go into debt.

6) Pick the right health plan and get them on it

Maybe the right health plan before was the highest deductible plan because you rarely go to the doctor. But maybe that's not the best move anymore. Look at:

• Deductible
• Out of pocket max
• Coverage for delivery
• Etc.

Then pick the plan that makes the most sense moving forward. Also, make sure to add your child within the first month so they actually get on your health plan!

7) Leverage the dependent care FSA

If you'll have qualified daycare costs, make sure to use your dependent care FSA.

This allows you to put in $5,000 on a pre-tax basis yearly, then you can use it tax free on daycare costs.

No reason to not take those tax savings.

8) Think about education costs

If college is an important goal and one you want to plan for, start thinking about leveraging a 529 so you can get the most tax free growth as possible.

If college is not a goal, then you can consider helping through:

• UTMA account
• Taxable account in your name and you gift it to them later
• Using an irrevocable trust

These are all the steps we are taking to best prepare for our baby on the way!