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Financial mistakes new parents make

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  • Financial mistakes new parents make

    I was just interviewed for an article in USA Today about my experience with financial mistakes new parents make and what they should be doing. Most mistakes result from misdirected emotion. How can you deny anything when you see that first smile or feel your baby flutter in your belly for the first time? Embrace the emotions but don't let them push the buggy, so to speak. My 4 suggestions:

    1. Buying too much stuff that is soon outgrown. Online shopping gives parents-to-be access to a world of things that they didn't realize were "necessities"! This is where a budget comes in handy. Take advantage of swap sales, Craigslist, and neighborhood Facebook groups. Admittedly, this is a huge problem for the first-time parent, not so much with babies #2 - #20.

    2. Setting up a 529 at the expense of your retirement account. Most new parents cannot afford to max out 401k's, Roth IRAs and then contribute a meaningful amount to a 529. If you're in that spot, hold off on the 529 and contribute as much as possible toward retirement. Not only are there no scholarships for retirement, but one of the biggest gifts you can give your children is your own financial independence in retirement. Or - open a 529 and let family contribute. It's the perfect gift for the kid who has, almost literally, everything.

    3. Buying life insurance for your baby. No explanation needed for that one. Instead, buy more term life insurance for yourselves now that you are responsible for raising a new human being.

    4. Losing track of gift cards. Gift cards are very popular but in 2015, $1B (yes BILLION) in cards & certificates expired unused. You have enough to manage as a new parent and gift cards may not make the priority list. Use a free app (I like Gyft) to track and use all your cards in one convenient place - your cell phone.


    My son and his wife gave birth to their first baby, August Lee Fox, a week ago today so this was an especially timely request for me. (Coincidentally, he happens to sell life insurance so I doubt he will think much of my insurance advice.) Best wishes to all the parents-to-be on the WCI forum!
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

  • #2
    THank you. I'm a new parent and was about to open a 529 and was going to get WL insurance.

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    • #3




      THank you. I’m a new parent and was about to open a 529 and was going to get WL insurance.
      Click to expand...


      You're welcome and congratulations!
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        I would also note that it is a good time (if one didn't already do so) to evaluate your disability insurance benefits. Physicians/Dentists aside, I would assume most new parents don't even own an individual policy or are familiar with the limitations of the coverage they are provided with at work, if any.

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        • #5
          I would add that one should shore up the estate planning, particularly with respect to guardianships and trustees for the estate (read: the children), in the event the unthinkable happens.

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          • #6
            Buying too much junk in general, crib/daybed as a newborn, all these things before you need or know if you will even use them. Buy it after you are certain you will use/need it. You dont need nearly as much as you think.

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            • #7




              I would also note that it is a good time (if one didn’t already do so) to evaluate your disability insurance benefits. Physicians/Dentists aside, I would assume most new parents don’t even own an individual policy or are familiar with the limitations of the coverage they are provided with at work, if any.
              Click to expand...


               

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              • #8
                Great list, very helpful tips.

                #1 is so so true, Johanna! They've made such a big industry of "baby essentials"... it is hard to ignore the subtle (or not-so-subtle) marketing and peer pressure everywhere. Most things end up being gently used and could very easily be passed along. I know this now, but if anyone tried to say that to me before #1, I'd never believe them.

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