by Stacy Francis, CFP®, CDFA
When I showed up at a recent Savvy Ladies seminar with my big belly, naturally, the conversation gravitated toward money and parenthood. Many soon-to-be and new mothers expressed concern about making financial mistakes that could hurt their babies. Below is a list of ten common money mistakes new parents make, so that you can learn from them and make wiser choices.
- Ditching life insurance. Death is an awkward topic – but so is the one of your child not being provided for in case of an accident.
- Ditching disability insurance – ditto.
- Missing out on the tax benefits generated by their newborn. Talk to your accountant or financial planner – you’ll be glad you did.
- Overspending on baby stuff. Your new baby needs many things in order to be comfortable, safe, and happy - but not a $2,000 stroller and an all-label closet.
- Acquiring life insurance for their child. Life insurance is supposed to make up for the loss of income your family would suffer if you kick the bucket. While the loss of a baby surely would be a major tragedy, it would hardly cause financial hardship.
- Getting so worked up over the baby’s savings, they forget to set money aside for their own retirement.
- Delaying college savings. No dollar will matter more than the ones set aside early on. Even if you can only afford tiny contributions, keep at it.
- The UGMA account trap. Not only will your child be free to do whatever he or she wishes with the money when he or she turns 18 or 21 (this varies by state), but large savings in your child’s name will reduce the amount of financial aid for which he or she is eligible.
- Not writing or rewriting their will. Make sure your baby’s fate is in your hands and not some stranger’s.
- Making the decision of whether to stay at home or keep working all about salary versus childcare costs. It’s much more complex than that! You also need to consider things like commuting costs and the value of the benefits package provided by your employer – and of course what you want to do!
Stacy Francis, Savvy Ladies