Financial Advice for the Expectant Parent


Preparing for the arrival of a new baby is an enormous undertaking; mentally, financially, (and sometimes physically).  I am fortunate to work with a number of expectant parents at our advisory business.  While circumstances vary and lifestyle/career changes are inevitable, first-time parents can certainly take proactive steps to plan for financial undertaking that awaits them.  While this post contains a far from an all-inclusive list, it can serve as a terrific foundation for your growing family.

Get your estate-plan in order!

I’ve spoken about wills before.  No one wants to think about their own mortality, let alone sit down and actually have to discuss it.  This is the time to do some real planning, however, and the sooner you get it done, the sooner you can stop thinking about it.  I suggest consulting an estate-planning attorney to help you prepare a basic will, which should contain a testamentary trust (this is a trust created for the benefit of the child that goes into effect only if both parents die).  The key is to actually put a will in place.  If the path of least resistance is to prepare it yourself using an online website then go for it.  You can always redraft a will with a professional when your budget allows for it.

Buy life insurance:

Term life insurance is the least expensive and most prudent way to go.  I generally recommend that expectant parents shop for these policies early during their pregnancy (and preferably even before getting pregnant) to avoid postponed decisions by the insurance company.  Pregnancies can often be complicated and insurance companies may wish to delay coverage decisions as a result.  Be sure shop for a 20 or 30 year policy with fixed premiums that does not require additional medical examinations, and that has a permanent-insurance convertible option.

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Get disability insurance:

Disability insurance will pay a portion of your salary for a period of time in the event that you get disabled.  It is often overlooked by expectant parents, but certainly worth exploring.  Group policies offered through your employer typically cover about 60% of your paycheck.  If your employer doesn’t offer you disability insurance as part of your benefits package, you can secure it independently but it may expensive.  Be sure to review policies carefully to ensure that pregnancy and potential pregnancy-related complications are covered.

Go easy on the baby stuff:

New parents have a propensity to overspend on baby-stuff, like cribs, strollers, and top of the line baby furniture.  These items can easily run into the thousands of dollars.  Baby gear, especially those high-end items, have very comparable (and most likely better) equivalents in the market.  Baby clothing can almost always be purchased on sale.  Subscribe to online mailing lists and wait for those 30% coupons to arrive in your inbox, you’ll be glad you had that little bit of extra patience.

Get that emergency fund in order, then contribute to a 529:

The emergency fund is a cornerstone of a sound financial plan.  It is even more important now that you are providing for one extra person.  You may even wish to maintain 6 months of living expenses (rather than 3) in it.  Be sure to have this account fully funded, and then start directing additional monies to a 529 plan.  This education saving plan can be opened as soon as you have your baby’s social-security number.  As long as you use the money for higher education do you are not required to pay tax on capital gains.  Currently, thirty-three states (plus DC) offer tax deductions on the 529 plan and withdrawals are tax free.

Best regards,

Jason M. Gilbert, CPA/PFS, CFF
Tel: 516-665-7800

By Jason Gilbert

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Jason explains about himself: I've been managing money for high net worth individuals since 2006. I'm the founder and Managing Director at RGA Investment Advisors LLC, an independent and fee-only registered investment advisor (RIA). I'm the partner in charge of wealth management and financial planning at Rayner and Gilbert CPAs. Prior to a career in wealth management and investment advisory, I held M&A roles at both General Atlantic LLC (GA), a leading global private equity firm providing capital for growth companies driven by information technology or intellectual property, as well as Berkery, Noyes & Co. (BNC), an independent Wall Street investment bank serving the broadly defined knowledge and information marketplace. At GA, I was responsible for deal prospecting, transaction structuring, as well as value added portfolio work. At BNC I specialized in serving large and mid-sized information providers in the U.S. and international markets with strategic mergers & acquisitions, corporate and asset divestitures, strategic research, and valuations. Prior to a career in Finance, I led the due diligence efforts for numerous financial buyers within KPMGs Transaction Services practice, and provided estate planning tax consulting services at the law firm of Buchanan Ingersoll, PC in Washington, DC. I am a CPA who holds the PFS* designation for my expertise in Personal Finance and a CFF** for my accreditation in Financial Forensics. I hold a B.A. from the University of Michigan and an M.S. in Accounting and Finance from the George Washington University School of Business. I lives in New York with my beautiful wife Julianna, two sons, Logan and Henry, and dog, Samantha

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