May 9 2014, 10:38pm CDT | by Forbes
For first-time mothers, pregnancy is an overwhelming physical and emotional experience. Aside from carrying up to 40 extra pounds, there’s the constant anxiety surrounding issues like preparing a baby’s room, picking a name and dealing with a host of logistical items, including selecting an OBGYN (if you don’t already have one), as well as a pediatrician.
This, of course, is only the beginning. Once the baby is born the level of life complexity only increases, and even with the best laid plans, it ultimately means one thing: Life will never be the same. And, while this may be the last thing in the world that expectant new mothers want to think about, this also means that, financially, life will never be the same either. And that’s why it’s important to deal with a wide range of near, medium and long-term financial planning items months before delivery.
As we head into the Mother’s Day weekend – when we salute the dedication and the sacrifices of millions mothers around the country – here are some key things that every expectant mother, especially first-time moms, should be thinking about from a personal financial planning standpoint:
**Returning to work – Mothers should keep an open mind. Even women who have every intention of returning to work after having a baby can have a change of heart once it is born. Working mothers should have a contingency plan that builds in all possible outcomes – digging deep to figure out what becoming a stay-at-home mom would mean for their family.
**Maternity leave – While some mothers ultimately decide to stay home and raise their children, not everyone will have that option for financial reasons. Given that an increasing number of women are the chief breadwinner for their families, this is happening more and more. In such cases, it’s important to take the maximum amount of maternity leave possible. No matter how committed someone is to their career, they should consider this: It’s much harder to extend leave than it is to come back early.
**Childcare – Finding suitable – and affordable – child care options can take time. Many parents experience enormous sticker shock when they find out how much it will cost to put their child in day care or hire a nanny. That’s why, when it comes to searching for childcare, the sooner, the better. Even mothers who plan to stay at home with their children should do very thorough due diligence on child care. Remember: It’s better to have and not need, than to need and not have.
**College Planning – Parents who get a jump start on saving for college are far more likely to have the means to cover most, if not all, of their child’s tuition. If current trends continue, 18 years from now college costs will range from merely very high to astronomical. Above all, consider setting up a 529 plan as soon as the child is born. This is a simple and easy way to set aside money in an education-targeted way. These accounts grow on a tax deferred basis, while the distributions are free of federal taxes as long as the proceeds are used to pay for higher education.
**Life insurance – Many don’t know that it is more expensive to obtain new life insurance or expand existing coverage after the first trimester. This is because many women develop gestational diabetes in the later stages of their pregnancy, which means they are technically categorized as a diabetic for insurance purposes, leading to more expensive premiums. While the premiums drop after the baby is born (as the condition will go away), not actively preparing before the end of the first trimester is likely to result in higher costs.
**Wills, Trusts and Estate planning – Everyone who has or is expecting a child should have a will. No exceptions. The same goes for having a trust and an estate plan. Moreover, first-time parents may sometimes have other relatives named as beneficiaries for certain investment, insurance and savings vehicles. This means that parents must ensure that they go through all forms in connection with their personal savings accounts, retirement plans, investment accounts and insurance policies to explicitly designate their spouse and children as the beneficiaries. Otherwise, there’s the risk that such funds could get tied up in probate, even if the will is clear as to who should be heir to the estate.
Having a baby is perhaps the most rewarding and exciting time in any mother’s life, but the changes swirling around them can make anyone’s head spin. As a result, new moms may have had neither the time nor emotional bandwidth to think seriously about many of the above financial planning issues, much less deal with them.
That’s why it’s crucial to enlist the help of a qualified professional. By getting the necessary support to take ownership over issues that are controllable, it will make it easier for them to deal with the ones that are not.
Winnie Sun is Founder and Managing Director of Sun Group Wealth Partners (www.sungroupwp.com), an independent wealth management firm based in Irvine, California, with approximately $150 million in brokerage and advisory assets under management.
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