You just found out your having a baby. Yay! You celebrate, you do a gender reveal, you paint the nursery, etc. All of these things are great, but you just saw the article from Time, which shows the cost of raising a child through age 17 is $233,610. Lol, your spouse asks how y’all will be able to afford that and you give the classic ¯\_(ツ)_/¯. You have to ask yourself “what do I need to do to get ready before my child is born?”
Here are the top 5 things I recommend doing before the baby comes:
- Get life insurance:
You’re going to die one day. Glad we started point 1 on a happy note. But, you are. If it were to happen early, wouldn’t you want your spouse to be able to pay of student loans, pay off the house, and pay for college education? Of course you would. You’re a nice guy. Life insurance is critical to everyone, but especially parents. I recommend getting life insurance on both parents, as this will insure the surviving parent will be able to be okay financially while learning how to be a single parent.
However, this life insurance needs to be term life, not permanent/whole life. You can say I’m on #teamtermlife 95% of the time. It is cheaper (see point #4) and it will allow you to get more coverage for less cost. Additionally, it will allow you to pick your coverage length (i.e. until you retire or until your kid graduated high school). Unfortunately it ends at the end of the term length, but we are using this life insurance to cover the cost of raising a kid in the event of an early death.
- Get your ducks in a row and get a will:
You’re going to die one day. Point 2 off to another strong start. You never want to think of the worst case scenarios, but knowing what will happen to your baby and your assets if you were to die, will allow you to sleep better at night.
Getting a will in place will allow you to decide who will take care of your child and decide how your estate will be distributed. If you and your spouse die, and you don’t have a will, a court will determine who the best person to look after your child is. As you won’t be alive, you won’t have a say in the matter, unless you establish this beforehand. Meet with an estate attorney and get a will. It will be worth it. Fun note: I used the word ‘will’ 8 times in this section. Will you get annoyed the word will? Probably. Hopefully you never have to use it again once you get you will done. Officially 11 times now.
- Understand your medical insurance:
Medical insurance is confusing. Deductible, co-insurance, copays, etc. If you aren’t already familiar with these terms, then you definitely are about to be. You’ll need to learn the ins and outs of what your insurance does and does not cover. I find this article from NerdWallet very helpful in describing the abc’s of medical insurance. Take the list of questions they give you, call your provider, and get to learning.
- Stop buying stupid things:
$233,610. The cost of raising your child according the Time article that is linked in the intro. Kids cost a lot. So get prepared and stop wasting money. Eating out too much? Eating too much avocado toast? Paying for all the TV channels when all you do is watch Fixer Upper on HGTV? It’s time to start scaling back your expenses. Best way to do that is budgeting. Not as scary of a word as you might think. It will probably turn out to be your best friend one day. Lol, just kidding. But seriously, cut the crap and start spending/saving money on the needs instead of the wants. You probably have at least 1-2 things pop in your head as you read this section. Start with those.
- Open up an education account for your child:
Okay, this is after the baby is born, but I just wanted to put it on your mind. I’ll detail later the differences in education accounts, but the main idea to start saving for college education for your child from day 1. Taking into account Parent Plus loans, it can save you around $30-$40k to pre-fund college vs post-fund college. By starting from day 1, you are taking into account compounding and helping ease the burden of rising college tuition. Some accounts that you can open up would be a 529 account, a UTMA, an IRA, or even a brokerage account. Again, I’ll detail these in another post, just get started.