In part 3 of our Kids and Money series, we discuss how to best plan for a new baby. How much do you really need to buy before the baby gets here? What should you do for insurance? Should you go back to work or stay at home?

We'll have answers to these questions and more on this week's episode of Personal Finance 120.


Transcription:
Hi, I’m Carly Cherry with Cambridge Credit Counseling and welcome to Personal Finance 120 – information for managing your financial life in about 2 minutes. If you’re considering starting a family, this video is for you because we’re going to discuss some ways you can prepare your finances for a new baby.

(On-screen graphic: Bare Necessities) Before the baby arrives, you may have a long list of things to buy, but are they all really necessary? Dozens of expensive outfits that your baby will grow out of in just a few short months aren’t worth your money and should be left on the shelves. If there are a few must-have items that don’t quite fit in your budget, your relatives may be more than willing to start spoiling your child early. You should also consider gently used items. Parenting.com maintains a list of websites and services where parents can buy and sell quality used baby items, including clothing, furniture and toys.

(On-screen graphic: Day Care Services) One of the biggest questions new moms hear is whether they’ll go back to work or if they plan on being a stay-at-home parent. While you’re thinking about your choices, it’s important to consider your budget before you make your final decision. On the one hand, daycare provides your child with social interaction while you earn an income. On the other hand, the average annual cost can range from $5,000 to $17,000, depending on where you live. Do your math and see which option is most affordable. Your parents or grandparents may be able to help if you don’t want or can’t afford formal day care.

(On-screen graphic: Insurances) You should already have life, disability and health insurance, but your policies may need updating. Review all three of these types of insurances, or get them as soon as possible, and make sure that you’re choosing the policy that will allow for the best coverage overall, including medical care and supplemental disability income. It’s crucial that you make sure your child’s needs will be met in the event that one or both of your incomes are compromised.

(On-screen graphic: Prepare for College) While college is not a current expense, you should start saving up for it just in case. A 529 plan is a state-sponsored investment plan operated by each state. These plans are designed to help save for the costs of college for your child, and you’re not limited to your own state’s plan.

(on-screen graphic: http://www.irs.gov/ Search for: 529 plans)

You can learn more about 529 plans on the Internal Revenue Service’s website.

(On-screen graphic: Create a Will) This may be the last thing on your mind, especially when you’re busy preparing for a new life, but you need to make plans in the event that you and your spouse are no longer around. If your child were to be left parentless, who would take care of them? How would they gain access to any money you’ve left them? Set up a meeting with a lawyer as soon as possible to organize your last will and testament.

That’s all for today on how to budget for a baby. Later this week, we’ll have an article on our Cambridge Website and Facebook page that will cover even more areas you should look closely at before your new baby arrives. Until next time, I’m Carly Cherry with Cambridge Credit Counseling.