How To Include A Baby In Your Financial Plans

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Cute BabyThis is a post by Connie Brooks, a new mommy in Louisville, KY.

Having a baby is a huge life event, and your entire financial outlook will change because of it. As if the initial cost of having a baby weren’t enough, you also have to ensure you’ve included your new addition to your overall financial plan. Here’s a quick guide on how to include your new baby in your long term financial plans.

Financial Paperwork

Let’s start with your baby’s paperwork:

  1. Add your new baby to your insurance policy – This one’s a no-brainer. You do want your insurance company to pay for labor and delivery right? Most insurance companies give you 30 days to officially add your brand new person onto your policy.
  2. Get a certified copy (or two) of your baby’s birth certificate – This is as simple as filling out a form and mailing it in. In fact, you can request your baby’s birth certificate just like you would request your own. If your hospital does not give you the forms when you have your baby, then you can visit the CD’s National Center for Health Statistics and select your state to order a certified copy.
  3. Get your baby a social security number, and social security card – This is something that your hospital will help you take care of. When you fill out the information for your baby’s birth certificate you will be asked if you want to do the same for the social security office. If for some reason you do not get a chance to do this before your baby comes home, then you can click here for more information on what to do to get your child a social security number.

Once you have your baby’s paperwork in place, then you are ready to begin adding them onto your financial accounts. It will take up to a month for your baby’s social security card to arrive in the mail. Wait until you have it to do the things below because you will need their Social Security number for each of your next steps.

  1. List your baby as a beneficiary on your financial accounts – This means that you will have to update any investment accounts you have to reflect the change, including any accounts you hold through your job. Now, you do not have to list your baby as a beneficiary – you can always leave your spouse or significant other as the sole beneficiary.

    However, my husband and I did add our daughter onto all of our accounts. We were afraid that if something happened to both of us at once, she might not end up with the money. On most of my financial accounts my daughter is listed as a secondary beneficiary, after my husband.

    If you take the time to do this right after your baby is born, instead of waiting, then it will give you greater peace of mind down the road.
  2. Have a will drawn up – Yes, I know, no one wants to think about this. But I can give you one good reason (well I could give you about a hundred, but we’ll stick with the most important). Your will is the only chance you have to name guardians other than yourself for your child. If something happened to you and your spouse unexpectedly, who would you want to raise your baby? If you do not decide, then our judicial system will, and that can get ugly, fast. It also gives you the opportunity to clearly spell out what happens to your money and property when you die. All things considered, it is an essential step if you want to secure your child’s future no matter what happens to you.
  3. Buy life insurance for yourself and your baby – This also falls into the “I don’t wanna do that” category for some of us, but it’s important. Gerber life policies are dirt cheap for children, and term life insurance is dirt cheap for adults. Buying life insurance doesn’t have to be painful, but it is essential.

Teaching Kids About Money

Ladybug Playing With Halloween MoneyThe next step from here is to decide how you want to teach your child about money as they grow up. In our case I opened a savings account, a Coverdell ESA account, and a general investment account for our daughter. All accounts are jointly in my name with my husband as the beneficiary if anything happens.

I chose to open these accounts for my daughter because I want to teach her that saving and investing are mandatory, not optional. I want her to grow up using them, and understanding them. My husband and I did not learn how to manage our money until relatively late in life. I do not want things to be that way for my daughter.

When she is older, I am going to jointly open a couple of credit cards with her and teach her how to use them. I do not want her to go off to college like I did, sign up for a credit card just to get a free t-shirt, and proceed to ruin her credit. I want her to know that her available credit is there to protect her in an emergency and not something you use just to order a pizza.

Now, I’m not even going to tell you that what I plan to do with my daughter is the only way, or even the correct way to teach a child about money. It’s just what I believe is best right now. If I change my mind as she grows, we will alter our plan.

Some other things you will want to consider:

  • Are you going to buy your child their first car? What about insurance?
  • Are you going to pay for your child’s college education? In full, part, or not at all?
  • How soon do you think your child should get a job?
  • What will the “Money rules” be in your house? (Save 10%, 20% or more?)
  • How will saving for your child’s future affect your retirement accounts?

You have a unique opportunity with your child – if they grow up learning a thing to be true, then they are likely to continue doing it when they get out on their own.

Now, For The Easy Part…

The most important thing to do right now is to sit down and talk with your spouse about how you want to raise your child. Discuss which types of accounts you will need to do that, and then work together to make it happen. There is no “catch all” strategy for how to plan your future to include your child. But you can be very sure of one thing: Once you have your baby your life will never be the same again, and neither will your money!

How about you? How do you teach your children about money? What did you do to work them into your long term plans?

(Photo: Baby by 44444, Ladybug by ncbrian)

{ 8 comments, please add your thoughts now! }

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8 Responses to “How To Include A Baby In Your Financial Plans”

  1. CK says:

    Just adding your child to your accounts as a beneficiary could turn out pretty ugly. What happens when your child is (pick an age) and you and your spouse pass? That’s right, the kid get’s all of the money with no over site. Yes of course you raised your kid right I’m sure it will be just fine. Get a trust.

    In my view life insurance is to protect dependents in case an income earner dies. Since my baby doesn’t make any money I’m not buying any overpriced/unnecessary life insurance for him. If the worst happened then burial costs would be paid from an emergency fund.

  2. Wow! You’re thorough. My wife and I just found out we’re pregnant and I can’t imagine planning exactly how we’re going to raise them from the get-go. Hats off to you though.

    Some of these things, like getting a will, life insurance, and updating your beneficiaries, I would even do before the baby is born. Then you’d have to update accordingly once he/she arrives. These are just part of making sure your family is protected in case of disaster. Also, long-term disability insurance might be a good idea to protect your income should you become incapacitated.

  3. Steve says:

    I agree with the first commenter about baby life insurance being unnecessary. Maybe the author or someone else can enlighten us.

  4. Please don’t name your infant as a joint owner of your financial accounts. What a mess that could create. Instead, establish a trust in your will/estate plan to handle the needs of your minor children.

    Why would you want to buy insurance on an infant’s life? Don’t understand the money wisdom in that.

  5. BSF says:

    Agree with other posters that life insurance belongs with the parents, not the child. Make sure that a good part of any beneficiaries of policies should include whoever you decide will take care of the children in case of both parents dying. You want to make sure that the people raising your baby have the means to do so. That is why they should receive a majority of the beneficiary funds if your child is young and you both die. As your child grows older, you could change the amount to reflect that the child may have some opinions where he/she goes in the event of your death.

  6. Giddy Up says:

    Just make sure you get that insurance form in to your insurer or employer’s HR Dept within 30 days of the birth. I got the form in advance, along with the fax number to send it to because I didn’t know if there would be complications with the birth that would keep me from returning to work to do all the paper work before the 30 days were up. Missing that deadline WILL cost thousands.
    Also agree that there is no need for baby/child insurance. wasted money.
    Another tax saving move is to open a 529 education account in their first year and start donating the max that your state allows as a deduction. In VA that’s $2k/yr. If you got a few kids, that’s a chunk of change.

  7. Jim says:

    I also don’t see how life insurance for a child makes sense.


  8. Connie says:

    Wow thanks for the great comments everyone!

    As for the baby life insurance, we do pay for a small amount each month. This is basically to insure that we could have a lump sum of money available for burial in a worst case scenario. No one likes to think of that, but it’s better to be prepared.

    Burial costs are not really that expensive though, so once we have a designated amount of money set aside in a savings account for her, then we will probably drop it. Obviously, we are praying that money will go to something, anything else, but in the meantime, we’re covering our bases.

    God forbid, but if something were ever to happen to our daughter, the last thing that I will ever want to do is worry about the expense.

    Also, if we choose to keep the insurance, she can pull the value at 21 and use it for whatever she wants, or continue on with the insurance. It’s less than $10 a month for peace of mind. We are putting away $50-$100 a month into her savings, and an additional $50 into her college account as well.

    Let’s see, as far as a trust goes, that’s excellent advice, and really should have been incorporated into this article. Maybe we can do a seperate follow up on just that!

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