As some of you know, prior to my life as a glorious SAHM, I was miserable as a financial advisor. Now, despite me not enjoying the actual work of a financial advisor, it was incredibly practical and useful in terms of preparing for my own personal future. (Also, I met some awesome people who started off as clients and became my friends.)
One of the main reasons I took the job (other than desperation, fear, and general cluelessness) was because even though I knew I wouldn’t really like it, the knowledge gained about finances and money was invaluable.
And since we just had our fourth child, Sasquatch, I recently had to make a bunch of updates to our finances in order to ensure that in the event of our improbable demise, ALL my children (no matter how new), would be financially taken care of.
Incidentally, I wrote a similar piece in my Money Series three years ago after Glow Worm was born. (Also, my buddy at Just Making Cents riffed off this current post on his blog. Want to see how he scored?)
So, I thought since I just did a bunch of adulting and took care of this crap, here are some of my Top Financial Things You Should Do After Having a Baby.
Disclaimer: I am a former financial advisor and used to own a financial advising firm with my mother. I am not being compensated by any entity or company for the following information. I am ONLY explaining what I do for my own family. If you should so choose to take this advice, please realize that it is not customized nor tailored for your specific situation. I am not dispensing personalized advice for you or your family. I am not responsible in any way, shape, or form if your investments rise or fall due to market conditions. YMMV. You have been warned.
1) Update/Create a Living Trust or Will
I know. I’m a morbid sort. But believe me – your loved ones will appreciate the forethought and time you took to make sure your assets were titled correctly, as well as included all your progeny.
Wills detail where and who gets your stuff, but Living Trusts go a step further and bypass probate. Furthermore, they can detail who will assume guardianship of your children, who will be the trustee over your assets should you die before your children are legally able to manage their assets, as well as whole slew of other handy details that make your financial life easier.
Remember: probate can take at least 60-90 days and often times, much longer (not to mention, you have to pay probate taxes). Bypassing probate is super important when your children may need to access funds in order to cover their living expenses.
Make sure your will/trust include ALL your children. (Well, assuming that you want to include all your children. But since the majority of my readers have small/young children, chances are, you do.)
I may be a registered Democrat, but I started off as a Republican and certainly do not think the government can cure all and do all. As a result, I really do not want the government to decide who should take care of my kids, where my assets should go, or anything else related to my personal or financial life.
If you are like me in this regard, make sure you get a living trust or at the very least, have a will.
Also, make sure you actually title your assets in the name of your trust.
It makes zero sense to have a living trust but not have any of your assets in it. That just means you wasted your money on lawyer fees without any of the benefits of their lawyering.
2) Update your beneficiaries.
Whether they be IRAs, Roth IRAs, 401(k)s, life insurance, Transfer on Death accounts – WHATEVER. If it has a beneficiary, make sure your newest child is added to the beneficiaries.
The possibility that my children may think I purposely disinherited them from any of our accounts versus just being an idiot or procrastinator or just a forgetful human makes me so sad. No child should be cut out of their inheritance due to stupidity on the part of their parents.
It’s a pain in the ass, I know. Lots of forms to sign and social security numbers to look up. I get it.
Do it anyway.
As soon as possible. One never knows the future – and though morbid, better safe than sorry.
3) Open up a savings/brokerage account and/or a 529 college savings account for your child.
Again, opening accounts is easy; funding them is harder. Fund the accounts, too.
Right after a child is born, I always deposit any gift cards or financial gifts in their account right away. (For gift cards, if someone gives my kid a $20 to Target, I will deposit $20 into their account and use the Target gift card however I want.)
I also transfer some “seed” money to get the account going as well as deposit any gifts they get throughout the year. I also set up their 529 plans with an automatic monthly investment. This way, I build in saving automatically and don’t have to remember to do it. (If I waited until I remembered, I would never save any money.)
I realize that not everyone has the luxury or benefit of people giving gifts or even having excess funds to save for their kids. Even so, I urge you to open up the accounts anyway. You never know when people are generous and kind during birthdays, graduations, and holidays. It is always better to be prepared. Plus, even if you can only sock away $10/month, that is still better than nothing.
4) Update your benefits.
If you have health insurance – ADD YOUR NEW BABY. Even if it is no longer your company’s open enrollment period, a new baby (whether through birth or adoption) is considered a life changing event and you usually have 30 days after birth/adoption to add your child to your health insurance.
If you don’t remember to add your child, then you will have to wait until your next open enrollment period before you can do so. Depending on when that is, you would have too pay for all the well-baby appointments and immunizations out of pocket and just pray your child doesn’t get sick or hurt the first year.
Save yourself the worry and the potential financial disaster. Enroll your child in your health benefits.
If you have other benefits at work that they qualify for, by all means, add them to those, too.
5) Get life insurance or make sure your life insurance is enough.
Look, I get it. I’m obsessed with untimely demises.
People always complain that life insurance is paying for something that won’t likely happen. But you know what? We pay for car insurance and hope to never use it. No one complains about that. (Well, that and it’s illegal to drive without car insurance. It’s thus far, not illegal to be alive without life insurance.)
Anyhow, my point is, if you are the primary breadwinner for your family and you die, how will your family provide for their living expenses? If you are one of the breadwinners, how will your family make up the difference in income? And if you are the SAHP, how will your family pay for the child care services you provide?
Even if you live modestly and have a lot of savings, how long will your savings last?
And right now, I really want to address the SAHP.
Look, I know you can always go out and get a job. I am obviously not commenting on our abilities to work and get well-paying jobs.
But to do so immediately after your spouse dies? While taking care of grieving kids and household stuff and paperwork and the business of the dead?
That is much harder.
And the last thing you want to think about after your spouse dies is how much of a hole you are burning through your savings while trying to find a job and sending out resumes and going on interviews while you and your children are grieving.
Furthermore, even if you, as the SAHP get a job, you will either have to accept a lower paying job in exchange for flexibility in your work schedule to take care of your children. Or, you have to pay for someone else to take care of your children. Either way, there is a monetary outlay that eats into your income.
Also, life insurance through your employer is great and all, but you need life insurance independent of your employer.
Why? Because if your employment terminates, so does your life insurance. And then, when you re-apply for life insurance, you will only be older and more likely to be in worse health.
Oh, and if you get a large amount of life insurance, (eg: $1 million), get multiple policies. That way, if you have a financial difficulty or you no longer need quite as much life insurance because the kids are grown or your savings are much larger, you do not have to cancel the entire amount only to re-apply when you are older and likely to be in worse health and have higher premiums (after all, the older you are, the closer you are to dying).
So, if you wanted a total of $1 million coverage, get two $500,000 policies. That way, if your financial situation becomes more volatile or you no longer need that much life insurance, you just cancel one $500,000 policy and still have the other $500,000 policy.
All this talk of death when there is a new life in the family. Seems counterintuitive. But I firmly believe that once you bring a life into the world, you are responsible for providing for them. And children are never more vulnerable than after the death of a parent.
Thus, it behooves us to do all we can while we are alive to make sure that our children are protected and provided for when we are not.
Besides, the superstitious part of me feels as if you are just inviting trouble if you don’t get this stuff taken care of ASAP.
The practical part of me knows that life happens and that when you have a new baby, you’re totally sleep deprived and overwhelmed – but you also know that the baby is new and it’s a good reminder of doing this stuff before you completely forget or it’s too late.
Now, get cracking!
(And don’t forget to check out Just Making Cents comments and feedback and additional advice!)