Jill on Money: Get financial house in order before having children
Sunday, July 26, 2015


By Jill Schlesinger
Tribune Content Agency
  Birth rates are up for the first time since the recession began, and economists are cheering. It’s not that the practitioners of the dismal science are lovers of baby showers; rather, they say that the new mini baby boom is yet another example of an improving economy.
  Births in the United States reached a record high of 4.3 million in 2007, when the economy was still percolating. But when the Great Recession hit, the birth rate began to plummet, falling below a level necessary to keep the population steady. The drop-off was to be expected, as financial uncertainty discourages couples from having babies.
  Thankfully, six years after the end of the recession the trend is finally reversing. Nearly 4 million babies were born last year, coinciding with an improving economy and consumer confidence. 
  It makes sense that people have to feel more secure about their job prospects to make the big financial plunge into parenthood. According to the most recent data from the Department of Agriculture, it costs an average of $245,000 to raise a child - and that’s before factoring in college! 
  Here’s the breakdown:
 Housing and transportation: $107,970 
 Child care and education: $44,400 
  Food: $39,060 
 Clothing and miscellaneous expenses: $33,780 
  Healthcare: $20,130 
  So what can families do to prepare for the financial burden of having a child? First, calculate anticipated expenses, including unreimbursed medical claims. Ask your health care provider about what is and is not covered. Ask about co-pays, co-insurance, deductibles, out-of-pocket costs, birthing and other classes and specialty tests. If you are able to use a flexible spending account (FSA) or health savings account (HSA), increase your contributions and let Uncle Sam shoulder some of the burden. 
  Also factor in unpaid time off, clothes, diapers and food - and assume that many of these costs will be part of your monthly nut for some time to come. Then try to set aside the extra money in an emergency reserve fund ahead of time. If cash flow is already tight, talk to your family about skipping the frivolous gifts and focus instead on the must-haves.
  Next, if you don’t have life insurance or rely on employer coverage, it is time for action. Both parents need to buy enough insurance to cover living expenses for survivors, the lump sum amount necessary to fund future educational expenses, and/or money to provide for the future retirement needs of the surviving spouse. To determine your specific needs, you can use the LifeHappens.org calculator.
  Term insurance is best for those who have a specific insurance need for a defined period of time, such as new parents who may not yet have saved a sufficient nest egg to support their survivors in the event of premature death. During the stated term of the policy, if the insured dies, the insurance company pays the face amount of the policy to the named beneficiary. Some insurance companies write policies for pregnant women up until the third trimester, so check around and see what is available and be sure to compare apples to apples.
  Finally, a child on the way should prompt you to take care of your estate planning. For many, a simple will (including guardianship instructions), power of attorney and health care proxy should do the trick. However, if the situation is more complicated, you may also need a trust. In all cases, I recommend engaging a qualified estate attorney. This is one area where paying up for advice and expertise is worth it.
Contact Jill Schlesinger, senior business analyst for CBS News, at askjill@JillonMoney.com.
This column was printed in the July 26, 2015 - August 8, 2015 edition.

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