Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, October 23, 1995 TAG: 9510240003
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF/STAFF WRITER
DATELINE: LENGTH: Medium
And because summer is the peak season for births, fall obviously is the time to begin planning for the happy event, including the impact of a baby on the family's money situation.
Wanda P. Sears, a personal financial planner with American Express Financial Advisors in Roanoke, said expectant couples should take a series of steps before creating or revising their household budgets to cover the pending arrival.
You should perform most of these tasks as far in advance as possible, according to Sears, perhaps even when the pregnancy itself is in the planning stages.
The first step, Sears said, is to plan a "slush" fund to cover the cost of unpaid maternity or paternity leave if you plan to take a break when the baby is born.
Sears said you should figure how much income you'll need to replace, then create a saving schedule. You might arrange for your bank or financial adviser to deduct money automatically from your paycheck and deposit it into a savings account or fund that will allow you to get the money when you need it.
She recommended a money market deposit account or savings account at a bank or a money market mutual fund at a brokerage house as best bets for holding this money.
Determine now how much extra life insurance you'll need.
Sears said you should meet with a reputable agent or financial planner who can help you calculate how much your family would need to survive financially if you, your spouse or both should die prematurely.
In considering insurance, she said, you must take into account your debts, your various sources of income and other financial goals, such as your desire to pay for your child's college education. You also may want to investigate the possibility of a policy rider that will insure your child, Sears said.
Evaluate your health insurance options.
If you and your spouse have coverage through separate employers, Sears said, this may be the time to consolidate to family coverage from one provider. You should talk with your companies' employee-benefits administrators about costs and options, then determine which of you will get the better deal on family coverage.
Estimate day-care expenses.
Unless you or your spouse plans to stay home full time, Sears said, you'll need to determine what kind of care you want for your child: in-home care, a day-care center or a nanny. How much will it cost? Research the names of, and fees for, reliable and licensed providers.
Check into child-care expense accounts.
Sears noted that your employers may offer a benefit that allows you to tuck pretax dollars away to use later to pay for child care. This method reduces your net income at tax time, reducing the amount of federal and state income taxes you'll have to pay.
Check with your employee-benefits administrator to find out how this program works, how much you can contribute, and how it can save you money.
Review your W-4 income tax withholding form. Every new addition to the family is a new tax deduction, Sears said. Talk with your company payroll administrator to find out how the amount of your paycheck will change with this latest adjustment.
Evaluate your long-term goals for the new child, Sears said.
Are you committed to paying for your child's college education? Did you have private elementary and secondary schools in mind?
If so, Sears said, it makes sense to start saving for these considerable expenses right away. Saving a little over the long term, she pointed out, is always easier than shelling out a lump sum.
Don't furnish the entire nursery in one month.
Buying the items you need for the baby can cost hundreds, even thousands, of dollars, she said.
Too many people use their credit cards to buy everything at once and incur heavy interest on a balance that takes several months to pay off, Sears said. Because sales on baby products are seasonal, be on the watch for discounts on the items you'll need.
Always buy with cash if you can, Sears said. But if you must use plastic, spread purchases out over time so you carry a smaller debt load.
Finally, Sears said, write a will.
If you and your spouse should die in a common accident, she pointed out, the courts would appoint a legal guardian for your children. A will allows you to select the person you would want to raise your children in your absence and to manage the assets you leave behind.
by CNB