Question from Nick in Ann Arbor: I’m having my first child in a few months. Do you have a checklist of things I should add to my financial to do list?
Congratulations that is very exciting! There are studies showing that each child will cost about $250,000 over 18 years. Don’t let that scare you. I’ve heard they will be the best years of your life.
A few things I would add to your checklist:
1.) Life Insurance. Term is typically what I recommend, 30 years is sufficient for a first child. Get enough to replace what you would rely on for you and your spouse. Stay at home parents have tremendous value, for planning purposes I use $50,000/year. I usually say get enough to: pay off the house, loans and any bills + 5 times the annual salary for each person + $100,000 per child for 4 year college. If you want to plan for additional schooling, weddings etc add that in accordingly.
2.) Setup a college savings plan. There are many options that range from prepaid tuition, 529 plans and even putting money in a custodian account in your child’s name with the parents on it until age 18. To help decide the option that’s best for you, talk to a Stonepath Wealth Management advisor.
3.) Research preschools, daycare and other places you might want to join, like an athletic club or place that would have a long wait list. If you look for these places at the time your child wants to go, it might be too late. In a strong economy, many of the best places have wait lists.
4.) Update your will. Make plans for your financial affairs as well as for your children. Decide who you would want to care for your children and have a conversation with them to see if they would be willing to help if something happens to you and your spouse.
5.) Life insurance gets all the publicity, but if you aren’t able to work, it would also cause a burden on your family. You should make sure that you have long-term disability insurance. Disability insurance can replace income if you are no longer able to work at the same type of job for various reasons.
Harrison Kennard is the co-founder of Stonepath Wealth Management in Ann Arbor, a Michigan-based independent wealth management firm that practices comprehensive, holistic financial planning and asset management. Location: 1925 Pauline Blvd A, Ann Arbor, MI 48103; Phone: 734.369.8143; Online: www.stonepathwm.com
If you have a financial question, send to Harrison at email@example.com
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