Kid on the way - financial decisions

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Kid on the way - financial decisions

Postby playtothebeat » Wed May 22, 2013 5:28 pm

I have a kid on the way in a few months, and started thinking about the financial aspects of parenthood. Other than knowing that I'll need to add him to my health insurance plan, look into day care, and at some point thing about college savings, I'm sure there is plenty more to think about.

What are some key issues I need to look into? For day care, is Dependent Flex Spending Account appropriate? For healthcare, my company offers HMO - Kaiser, as well as PPO through either an Health Reimbursement or a Health Savings account; what do I need to consider when choosing which plan to go with (I previously had Kaiser, but this year switch to the HSA for myself); Best vehicles for college savings (I live in CA, and I'm sure that makes a difference when it comes to choosing what to invest in)? Life insurance? etc.
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Re: Kid on the way - financial decisions

Postby BestWishes » Wed May 22, 2013 7:29 pm

Make sure you have a will or living trust to appoint a guardian for your child and someone to handle your finances (often it is the same person) in case something happens to you/spouse.
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Re: Kid on the way - financial decisions

Postby livesoft » Wed May 22, 2013 8:05 pm

Key issues:
Disposable or cloth.
Breast or bottle.
Sleep in parents room or another room.
Buy all kinds of junk for baby or let others buy everything for baby when they see that you don't
Whose mom gets to come first

Congrats. Babies are easy and inexpensive for the most part. And lots of fun, too.
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Re: Kid on the way - financial decisions

Postby doug91 » Wed May 22, 2013 9:02 pm

Our daughter was born two years ago, and that was my trigger to finally get a 30-yr term life plan - income replacement felt a lot more urgent with a dependent on the way. Lots of good tips on how to do that on this forum & the wiki. We also did a full-blown will, estate plan, etc, which was another one of those things I'd kept meaning to get around to.

One insurance issue that I hadn't thought about, but which caused us an absurd amount of paperwork: you can't add your child to your insurance until they're born. My wife and I had separate plans, each through our own employers - hers was great for an individual but too pricey for a 2-person plan. When our daughter was born, we put everyone on my insurance, since that was a qualifying event. But, since my wife had been the one admitted, they processed everything - including my daughter's post-natal care - on her insurance, because my daughter hadn't been added to mine until she was born. Anyway, it took for-freaking-ever to get it sorted out so that my wife's insurance covered her and my insurance covered our daughter, just something to keep in mind up front if you & your spouse are on separate plans.

The Dependent Care FSA seems like a good deal, we don't take advantage of it because my wife's currently staying at home (apparently can't be used if there's a stay-at-home parent, which was a surprise to me).

In re: the earlier post, cloth diapers are way easier than you'd think, but a lot of day care providers won't let you use them, worth checking into before you invest in the up-front expense (which is *very quickly* outweighed by the savings). And don't even get me started on how cheap breast-feeding is. :)
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Re: Kid on the way - financial decisions

Postby ruralavalon » Wed May 22, 2013 9:18 pm

Congratulations on the upcoming child :) .

Update your will, and make sure a trust is set up with an apprpriate guardian.

Reevaluate your life insurance amount, and make sure you are using term insurance.

We alawys had our children on the same medical insurance policy I had for myself, not sure there is any other way to do it.

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Re: Kid on the way - financial decisions

Postby staythecourse » Wed May 22, 2013 9:46 pm

livesoft wrote:Key issues:
Disposable or cloth.
Breast or bottle.
Sleep in parents room or another room.
Buy all kinds of junk for baby or let others buy everything for baby when they see that you don't
Whose mom gets to come first

Congrats. Babies are easy and inexpensive for the most part. And lots of fun, too.


Just had our first 8-9 months back and don't think any of those are that important. Those decisions will be forced to be made (even if you don't plan ahead) AND often your wife will decide what she feels most comfortable with. Moms seem to be more set then Dads on issues like this. Brought up generic formula with by wife and got the death stare. :D

The best advice:
1. Be supportive of your wife as she will go through a lot of emotions (mostly good) before, during, and the first 6 months after delivery.
2. You and your wife should get as much sleep as you can now.
3. How easy being a parent has NOTHING to do with you, but more to do with how easy of a baby you have. If you have a easy going baby it is easy, but if you have one that is spirited/ sassy it is quite the challenge. My wife and I are both physicians and are used to being up all night and our LO is quite the difficult baby. She is starting to get easier only now. Other babies I see seem like a piece of cake so it is baby dependent. This is why some say raising kids is easy and others say not so much.
4. Get a will (personal guardian) and either a trust or UTMA accounts for adult custodian for property. Minors can't own property beyond some low number ?$5,000.
5. Make sure life insurance is set for all involved
6. Make sure disability insurance is done if needed.
7. Get ready to be flexible as life will never be the same.
8. HAVE FUN.

BTW, yes it is totally worth it.

Good luck.

p.s. Congrats
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Re: Kid on the way - financial decisions

Postby vveat » Wed May 22, 2013 10:11 pm

Avoid overspending on baby gear, clothes and above-all on toys. Before you know it you'll be swimming in kids stuff and looking for a larger house.
Babies don't need much. Really! Even firstborn ones
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Re: Kid on the way - financial decisions

Postby playtothebeat » Thu May 23, 2013 7:49 pm

Thanks everyone, appreciate the input.

I don't know anything at all about wills or trusts. What's a good starting point to learn (other than talking to attorneys - even though I'm marrying one, family law isn't her specialty)?

When it comes to life insurance, I understand term life is the way to go. How do you chose a provider? What are some things to look for? As you can tell, this is aaalll very new to me.
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Re: Kid on the way - financial decisions

Postby ruralavalon » Fri May 24, 2013 8:23 am

On the will and trust:

1. both of you decide together who you want to take care of your child if something should happen to both of you;
2. you decide together who should handle your estate if something should happen to both of you;
3. in general an ordinary mutual will will often cover the rest, each of you wills everything to the other; and
4. to select an attorney, defer to your spouse if she has been in practice awhile and knows who does what locally, otherwise check local law lists for ideas -- http://www.martindale.com/ .

For term life, here is a way to price shop or at least compare any quotes you get: http://www.selectquote.com/landing_t.as ... MgodNVYA5Q .
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Re: Kid on the way - financial decisions

Postby Andyrunner » Fri May 24, 2013 8:43 am

Expecting my first in August So I'm probably right along with you.

Things I have noticed:

Life insurance...I still need to look into this.
Avoiding all of the additonal not nessecary baby crap they sell, garage sales are great for clothes.
Do you need a new vehicle? My two seat pickup wouldnt of worked, bought a new subi outback
House, I suggest wait till after kid is born, almost bought a new one and moved, decided to hold off. Glad we did.
Daycare is really expensive and fills up fast, have one locked in ASAP
College 529. Im still up in the air on getting one or just a general savings/mutual fund.
Your Emergency fund will probably need to be beefed up a bit
Is your wife or you cutting your hours? Might want to re-evaluate your budget
Diapers, we are going to attept cloth (bum-genius gets great reviews) though I have no experience yet, hell I have never changed a diaper before

As far as wife being prego, my advice:
Be nice, she will be very emotional and take it out on you a lot
Don't say the word 'Pregosourus' in front of your wife even if your not referring to her, it doesn't end well.
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Re: Kid on the way - financial decisions

Postby Grt2bOutdoors » Fri May 24, 2013 8:57 am

Andyrunner wrote:Expecting my first in August So I'm probably right along with you.

Things I have noticed:

Life insurance...I still need to look into this.
Avoiding all of the additonal not nessecary baby crap they sell, garage sales are great for clothes.
Do you need a new vehicle? My two seat pickup wouldnt of worked, bought a new subi outback
House, I suggest wait till after kid is born, almost bought a new one and moved, decided to hold off. Glad we did.
Daycare is really expensive and fills up fast, have one locked in ASAP
College 529. Im still up in the air on getting one or just a general savings/mutual fund.
Your Emergency fund will probably need to be beefed up a bit
Is your wife or you cutting your hours? Might want to re-evaluate your budget
Diapers, we are going to attept cloth (bum-genius gets great reviews) though I have no experience yet, hell I have never changed a diaper before

As far as wife being prego, my advice:
Be nice, she will be very emotional and take it out on you a lot
Don't say the word 'Pregosourus' in front of your wife even if your not referring to her, it doesn't end well.


529 plan - do it, even if it's just $50 a month - if you can, I started from the day I got the TIN #, have not regretted it. Compounding does work and the gains will be tax-free to you.

Diaper genie - if you use disposable.
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Re: Kid on the way - financial decisions

Postby guitarguy » Fri May 24, 2013 10:43 am

Andyrunner wrote: 'Pregosourus'


Bahahahahaha! :mrgreen:

I don't have much to add, but I'm enjoying all the advice. My wife is 4-5 days late right now. We have our fingers (and toes and whatever else we can cross) crossed. We've been trying for quite a while.

Congratulations and best wishes!
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Re: Kid on the way - financial decisions

Postby runner9 » Fri May 24, 2013 11:17 am

doug91 wrote:The Dependent Care FSA seems like a good deal, we don't take advantage of it because my wife's currently staying at home (apparently can't be used if there's a stay-at-home parent, which was a surprise to me).


We put the max, $5K, in a year and then get it back with reciepts from daycare. That's correct, it can't be used to pay a family member, so you can't "pay" your wife to watch the child tax free.
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Re: Kid on the way - financial decisions

Postby doug91 » Wed May 29, 2013 1:48 pm

runner9 wrote:
doug91 wrote:The Dependent Care FSA seems like a good deal, we don't take advantage of it because my wife's currently staying at home (apparently can't be used if there's a stay-at-home parent, which was a surprise to me).


We put the max, $5K, in a year and then get it back with reciepts from daycare. That's correct, it can't be used to pay a family member, so you can't "pay" your wife to watch the child tax free.


And I also think she has to be working, right? For example, our 2-year-old will start day care soon since our second child will be born in October, but my understanding is that we can't use Dependent Care FSA for our older child's day care because my wife is not employed.
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Re: Kid on the way - financial decisions

Postby doug91 » Wed May 29, 2013 1:53 pm

playtothebeat wrote:Thanks everyone, appreciate the input.

I don't know anything at all about wills or trusts. What's a good starting point to learn (other than talking to attorneys - even though I'm marrying one, family law isn't her specialty)?

When it comes to life insurance, I understand term life is the way to go. How do you chose a provider? What are some things to look for? As you can tell, this is aaalll very new to me.


Also, if your employer or hers has a group legal plan, you should be able to enroll in that when your child is born, as I believe that's considered a qualifying event for benefits enrollment, and then get the will drawn up by a provider in that plan (usually Hyatt Legal Services). Might save a few dollars, but at the expense of being able to choose your own attorney.

For term life insurance, I used http://term4sale.com/ from the Bogleheads wiki, seemed like a really straightforward process, ended up with a very reasonably priced plan from ING. Of course, I personally won't know if that purchase actually worked out...
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Re: Kid on the way - financial decisions

Postby ddunca1944 » Wed May 29, 2013 2:03 pm

Grt2bOutdoors wrote:
Andyrunner wrote:Expecting my first in August So I'm probably right along with you.

529 plan - do it, even if it's just $50 a month - if you can, I started from the day I got the TIN #, have not regretted it. Compounding does work and the gains will be tax-free to you.


+ 1

Even better, encourage the grandparents to contribute (instead of giving the kid more toys than they need.
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Re: Kid on the way - financial decisions

Postby runner9 » Wed May 29, 2013 2:11 pm

runner9 wrote:
doug91 wrote:The Dependent Care FSA seems like a good deal, we don't take advantage of it because my wife's currently staying at home (apparently can't be used if there's a stay-at-home parent, which was a surprise to me).


We put the max, $5K, in a year and then get it back with reciepts from daycare. That's correct, it can't be used to pay a family member, so you can't "pay" your wife to watch the child tax free.


A quick google check says that's correct. Why would you pay someone to watch your kid if your wife isn't working though?
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Re: Kid on the way - financial decisions

Postby Quickfoot » Wed May 29, 2013 5:39 pm

Put 5K in a variable annuity invested in the stock market in their name at Vanguard after he /she is born. 8% average return turns that 5K into $500,000 when they are 60, also takes the pressure off of you to leave an inheritance.
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Re: Kid on the way - financial decisions

Postby FinanceRookie » Wed May 29, 2013 8:37 pm

runner9 wrote:
doug91 wrote:The Dependent Care FSA seems like a good deal, we don't take advantage of it because my wife's currently staying at home (apparently can't be used if there's a stay-at-home parent, which was a surprise to me).


We put the max, $5K, in a year and then get it back with reciepts from daycare. That's correct, it can't be used to pay a family member, so you can't "pay" your wife to watch the child tax free.


Correct me if I am wrong, were contributions to a F.S.A. unlimited prior to the implementation of the $2,500 cap effective 2013?
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Re: Kid on the way - financial decisions

Postby interplanetjanet » Wed May 29, 2013 9:02 pm

FinanceRookie wrote:
runner9 wrote:We put the max, $5K, in a year and then get it back with reciepts from daycare. That's correct, it can't be used to pay a family member, so you can't "pay" your wife to watch the child tax free.


Correct me if I am wrong, were contributions to a F.S.A. unlimited prior to the implementation of the $2,500 cap effective 2013?

Dependent care FSA was capped at $5k by federal law prior to 2013. Medical FSA was not capped, but was commonly limited by employers to $5k.

Also, the rules about family members are a bit more complex than that. I have used my depcare FSA to pay my mother in-law for child care, but I also have to pay state and federal payroll taxes on her income. It's still a win in the end, though.
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Re: Kid on the way - financial decisions

Postby guitarguy » Thu May 30, 2013 9:48 am

interplanetjanet wrote:
FinanceRookie wrote:Correct me if I am wrong, were contributions to a F.S.A. unlimited prior to the implementation of the $2,500 cap effective 2013?


Dependent care FSA was capped at $5k by federal law prior to 2013. Medical FSA was not capped, but was commonly limited by employers to $5k.


Medical FSA accounts were/are capped at $2500 max this year (per person per plan). Prior to that the cap was $5k; I believe that was decided by the employer but I'm not sure on that.

Edit: ....what interplanetjanet said!! Double post. :oops:
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Re: Kid on the way - financial decisions

Postby NOLA » Thu May 30, 2013 10:29 am

Quickfoot wrote:Put 5K in a variable annuity invested in the stock market in their name at Vanguard after he /she is born. 8% average return turns that 5K into $500,000 when they are 60, also takes the pressure off of you to leave an inheritance.


Variable Annuity? What are the fees?
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Re: Kid on the way - financial decisions

Postby Grt2bOutdoors » Thu May 30, 2013 11:31 am

NOLA wrote:
Quickfoot wrote:Put 5K in a variable annuity invested in the stock market in their name at Vanguard after he /she is born. 8% average return turns that 5K into $500,000 when they are 60, also takes the pressure off of you to leave an inheritance.


Variable Annuity? What are the fees?


Can be as low as 50bps all-in through Vanguard. However, don't kid yourself a $5K lumpsum even compounding for 60 years, may or may not return $500K since annual returns are not linear, they tend to come in clumps, up 5%, up 8%, down 10%, then up, then down, each down period depending on the timing will require an even greater uptick in returns to get you back to previous balance before surpassing it. On the other hand, keep depositing funds in it until 18 and you might have a different story come age 60. Not sure if annuities are off limits for FAFSA purposes since the intent of an annuity is to be used for retirement purposes. Could be another asset shield.
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Re: Kid on the way - financial decisions

Postby Quickfoot » Thu May 30, 2013 11:50 am

Absolutely there are no guarantees for performance but is a great gift to a child, in my opinion even better than paying for their college is providing for their retirement. It is not tax deductible but it is tax deferred and there are no income requirements which makes it a great way to save for a child's retirement. Vanguard's variable annuity rates are higher than normal etfs and funds but still considerably lower than most 401K fees. They can access the money once they are an adult but they have to pay income tax and fees, just like early 401K withdraw so there is built in encouragement to leave it in place for retirement.
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Re: Kid on the way - financial decisions

Postby Grt2bOutdoors » Thu May 30, 2013 12:14 pm

Quickfoot wrote:Absolutely there are no guarantees for performance but is a great gift to a child, in my opinion even better than paying for their college is providing for their retirement. It is not tax deductible but it is tax deferred and there are no income requirements which makes it a great way to save for a child's retirement. Vanguard's variable annuity rates are higher than normal etfs and funds but still considerably lower than most 401K fees. They can access the money once they are an adult but they have to pay income tax and fees, just like early 401K withdraw so there is built in encouragement to leave it in place for retirement.


I agree, however, most folks do not have that sort of coin available to undertake a VA in addition to other expenses.
Plus, that $25 annual fee is a killer until you reach the $25K minimum threshold to avoid the fee. Paying 50 bps in fees on top of the annual fee makes it very pricey when you compare it to a regular mutual fund in an UTMA account.
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Re: Kid on the way - financial decisions

Postby DoWahDaddy » Thu May 30, 2013 12:22 pm

livesoft wrote:Disposable or cloth.


A comfortable retirement is not that important.
Me: 75/25 stocks/bonds | Son: 45/45/10 matchbox/hotwheels/thomas & friends
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