Whether you’re in the planning stages, growing into your chic maternity wear or have a little one in the nursery already, you know that being a parent changes everything. So while you may wonder if you’ll ever fit into your skinny jeans again (you will), you wonder more about your baby’s future, how to give your child the best of everything and how to protect your entire family. By putting the right plans in place from the get-go, you can stop worrying about the what-ifs.
Part of raising kids is letting them make mistakes. As they get older, their mistakes will grow right along with them. (Case in point: Cutting a doll’s hair at age four is way less serious than getting a crush’s name tattooed on one’s back at 18. Agree?)
But life is full of surprises—some pleasant, some not so much. And it’s the ones that change your child’s life forever that you worry about the most. Since you and your spouse (or partner) are your child’s primary providers, you must think of the unthinkable: what if something happens to one or both of you, or even your child?
Sure, it’s hard to think about. But the best thing you can do is have a plan in place to protect your family. Here’s what you need to know.
You Need Life Insurance
First, get enough life insurance for you and your spouse/partner to provide long-term financial security for your family. This is important because life insurance can:
Ensure all of your debts would be covered should something happen to you or your spouse/partner. Like most young families, you probably have few investments and large debts (a mortgage, car loan and outstanding credit card debt, for example).
Replace a breadwinner’s lost income or pay for childcare should either parent die, ideally until the children reach 18 years of age or older.
Cover funeral expenses and buy the time needed for a grieving family to adjust to the loss of a parent.
You may also consider securing a basic term life insurance policy and/or critical illness policy for your child. Why would they need it? It starts them on a financial path early on and ensures that they can build on that plan and not get denied coverage down the road should they get ill — as you pray they won’t — at a young age. Your insurance provider/financial planner can guide you in the right direction.
You Need Up-to-Date Wills
You and your spouse/partner need to have valid, up-to-date wills. If you don’t, your estate will be divided according to provincial laws, which may not reflect your wishes. An up-to-date will allows you to:
Appoint a representative to administer your estate. Depending on where you live, your representative may be called an executor, estate trustee or liquidator. This person or company is responsible for settling with creditors and distributing your assets according to the terms of your will. It’s a good idea to name an alternative representative in case your first choice is unable or unwilling to accept the duties.
Appoint a guardian, or “tutor” in Quebec, to care for your dependent children.
Set up a testamentary trust within your will. A trust allows you to leave instructions as to how certain estate assets are to be managed over time, rather than giving them to a beneficiary outright. For instance, you might set up a testamentary trust to provide regular income or to pay for post-secondary education for your children and manage their assets on their behalf until they reach a specified age.
You Need Powers of Attorney
A will is vital, but it doesn’t come into effect until you pass away. You also need to consider the possibility of becoming seriously ill or disabled and unable to make financial decisions. In that case, you want to protect your property and your personal care. Here’s why:
To protect your property. To protect against this contingency, you need a continuing power of attorney for property. (In Quebec, it’s called a mandate in anticipation of incapacity.)
To protect your personal care. Similarly, a power of attorney for personal care enables you to name someone to make decisions about your medical care.
Get the Right Advice
Life insurance, wills and powers of attorney are the building blocks of your estate plan. With professional advice, you can use them to protect your family now and in the future.
Yes, it can be complicated. Yes, it can be a difficult conversation to have. But the peace of mind that comes with having a plan of protection in place is priceless.
All this to think about and your child hasn’t even started driving, dating—or perhaps even moved beyond diapers—yet! Just remember that having an estate plan in place helps ensure you can give your children the best of everything. And isn’t that what every parent wants?
The January 7 birth of Blue Ivy Carter, the first child of R&B royal couple, Beyonce Knowles and Jay-Z, has opened the floodgates for this year’s baby boom in Hollywood. Next up? Superstars Jessica Simpson and Hilary Duff are both expecting bundles of joy in early 2012.
And what about you? Thinking about starting a family of your own this year? Well, you’d better hold onto your handbag, honey!
Having a baby is a beautiful, life-changing experience. Unfortunately, it’s also an extremely costly endeavour. From maternity clothes to diapers, daycare to college, having a baby is a big investment. If you’re going to be a new parent soon or are planning to have a baby, here’s roughly what you can expect to spend during the nine months leading up to your due date (and beyond).
Prenatal Diet ($100s to $1000s)
Although it’s easy to get excited about the countless things you can buy your newborn, tiny UGGs are not a necessity. Stop thinking about things and instead start investing in your health. Prenatal care is essential both before and throughout your pregnancy. This is what will help ensure a healthy delivery and a healthy baby.
Prenatal vitamins are the building blocks of any prenatal diet. Women of childbearing age (even those who aren’t planning on starting a family) should invest in a standard multivitamin. Find one that contains folic acid (this nutrient helps prevent some common birth defects and is a main ingredient in doctor-prescribed prenatal vitamins). Over-the-counter options cost between $10 and $20. Most health insurance plans should cover any specialty nutrients prescribed by your Ob/Gyn.
Your baby literally depends on your body for essential nutrients, so maintaining a healthy diet while pregnant is critical. As such, expect that your grocery bill might just double. Instead of filling your diet with starchy and fatty foods, opt for fresh fruits, vegetables, and yogurt. Avoid highly processed foods and try to stay away from unhealthy restaurants. This new diet may put a cramp on your budget, but healthy eating is one expense you simply cannot avoid.
Maternity Leave ($10,000s)
Working women should brace for a major pay cut during the first year of motherhood. While some companies offer extensive parental leave packages, most provide only basic coverage that abides by Canada’s Employment Insurance program. As of January 1, 2012, these benefits cover only 55% of your average insurable weekly earnings, up to the amount of $45,900. That’s a maximum of $485 per week.
Capital Costs of Having a Child ($100s to $1,000s)
Cribs, strollers, changing tables, car seats—first-time moms need to purchase a lot of essential care items during the months leading up to their due date. Luckily, there are ways to save when it comes to purchasing these big-ticket items:
The Stuff You Can’t Live Without ($1,000s over an ongoing period)
Babies go through a lot of ‘stuff’—diapers, formula, clothing, toys; the list goes on and on. And while you want your child to have the absolute best, it’s critical that you stop and consider your household budget before you start buying everything at the designer baby boutique. Newborns grow—fast. So don’t waste your money investing in exorbitantly priced outfits. Discount stores and hand-me-down items will look just as good without costing you an arm and a leg. Gently used toys are another great way to keep your budget in check. If you’re environmentally minded, consider investing in washable diapers rather than the expensive disposable variety. Finally, talk to your doctor about formula options. This is one area where you don’t want to be stingy, especially if your baby has special dietary needs.
Looking to the Future ($10,000s)
The two biggest future costs to consider when pregnant are childcare and educational savings. Saving for your baby’s future is somewhat easy, if you can afford it. RESPs (Registered Education Savings Plans) require relatively small but consistent contributions. Automatic deposits will make saving for your child’s college education a no-brainer.
Childcare can be a bit more difficult. In most major Canadian cities, formal daycare can cost as much as $1,000 a month. Home daycares are slightly more affordable, averaging around $750 a month.
Luckily, daycare is a tax-deductible item, so make sure to claim it on your taxes.
Oh Baby, You’re Worth It!
Whether you’re R&B royalty or just a regular first-time mom, it’s important that you take the time to plan your pregnancy, both from a health perspective and a financial standpoint.
Rest assured, you may have to forsake your designer clothes for the price of raising a little one, but you will never doubt that it’s absolutely, unequivocally…worth it.
Comments
I had a quick glance at this article as in addition to being relatively new parents, I also returned to work only part-time which is a significant change for us in terms of income. In the section “Stuff you can’t live without” I was pleased to see that the use of cloth diapers was mentioned however I was very, very disappointed that there was NO mention of breastfeeding as a cost-saving option - never mind a very healthy one for both mom and baby! While I recognize that some moms & babies cannot or do not breastfeed for a wide variety of reasons, many can and while there may be more effort involved at the beginning, it is both a money and time saver overall. While most breastfeeding moms like to have a small number of bottles on hand, some nursing “wear” and a good pump, none of these items are absolutely essential to good breastfeeding, and both bottles and nursing clothes can often be purchased used. The only real cost is related to mom needing extra calories and good diet, a habit that as you mentioned, should be started in pregnancy. And further, even those who are experiencing breastfeeding difficulties can have access to a lactation consultant free or for little charge at various well baby clinics. I hope that you might consider adding this to your discussion, or future articles; again, I recognize that this is not an option for everyone, but for those on the fence, this information may be very relevant!
I’m very surprised that the author doesn’t mention breastfeeding as a way to be budget conscious (as well as all the other benefits). Bottles, formula (as mentioned) etc is a huge expense and breastfeeding is essentially free!