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How To Include A Baby In Your Financial Plans

This 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 [3] 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 [4] 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 [5] 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

The 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 [6], 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:

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 [7], Ladybug by ncbrian [8])