By: Mary E. McCraw, CFP®

I am in the phase of life where it seems like everyone I know is having babies. Organizing your financial life in the midst of showers and preparing for maternity leave can feel daunting.  Yet, it is important to focus on it before the baby arrives.

To work or not to work?

If both parents choose to keep working, get your childcare lined up as early as possible. Securing the right caregiver can become competitive!  Explore your options and consider any schedule or lifestyle adjustments that may be needed.

If one spouse will be temporarily leaving the workforce, there are extraordinary factors to weigh. In addition to the lost income, you need to consider the long-term impact on that parent’s career.  More importantly, carefully weigh whether you can realistically live on one income with the increased costs of having a child. If not, difficult value decisions about what expenses to cut will be required.

Emergency Fund

Before the baby arrives, build up cash reserves to offset lost income during leave, as well as an emergency fund of 3 to 6 months expenses. After the baby arrives, expenses will increase and it will be that much harder to set aside the extra cash.

Risk Management

With a baby arriving, life insurance needs will change. A surviving spouse will need access to cash to pay for immediate expenses, cover debts and potentially provide for lost income. It is not something most people want to think about, but it is prudent to make sure this need is covered especially with a young child.

In addition to life insurance, make sure estate planning documents are prepared (or updated) soon after the baby’s arrival. We recommend engaging an attorney that is an estate planning specialist. Among other things, you will want to name a guardian to care for your child if something were to happen to both parents.

This is just a short list to get you started. Most other decisions, such as college funding, can wait until things settle.

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