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Planning for Your Expanding Family: Keys to Establishing a Stable Financial Foundation

Updated on October 1, 2017
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Responsible Dad is the father of identical twin girls. He is an involved parent and avid reader/writer on personal financial planning.

What to Expect

When I found out that we were expecting twins a swirl of thoughts went through my head from excitement about becoming a family of four to anxiety about setting up a stable financial future for my new family. I also learned early on in my wife's pregnancy that the closer we moved to her due date our to do list continued to grow larger and larger with all of the things we wanted to buy or do before delivery.

It is very easy to get overwhelmed with the laundry list of baby preparation tasks. Additionally, as parents of multiples know, the work involved for preparing for twins is even more involved as doctor appointments are more frequent and bed rest can be common later in pregnancy.

Being a new parent is both challenging and rewarding but it is by no means uneventful or predictable. Using your time now to lay a foundation for your new family will save both time and undue stress for the entire family.

Why now?

While it may seem tempting to delay reviewing and refining your financial situation for your new family until after your child has arrived I urge you to push forward.

Given the many conflicting priorities and responsibilities leading up to the delivery date it is common to assume you will have more time after your child is born to handle matters such as life insurance, establishing a will, or even refining your medical insurance coverage. However, your time will become even more scarce after your child is born and all to often this leads to the important issues being delayed further and further into the future.

As any new parent will tell you, the days of being able to plan and find time for most anything outside of the post birth day-to-day routine are gone.

Setting a stable foundation

Despite the challenges that being a new parent brings there are some key steps you can take before your children arrive to set you and your family up for success during those first few months.

  1. Understanding and Choosing your Medical Insurance
  2. Obtaining Life Insurance
  3. Establishing a Will and Trust

1. Understanding and Choosing your Medical Insurance

Depending on the timing of your pregnancy you may have the option of changing your medical insurance selection prior to delivery. As the cost of childbirth can vary significantly depending on your location, the complexity of the birth, and the length of stay for mother and child after delivery the importance of selecting the best medical insurance plan available to you is as important as ever.

What should I look for?

Each Medical Insurance Plan should be evaluated with their annual premium levels taken into consideration. In general, the ideal plan would include the below:

  • Low Deductible
  • Low Maximum out of Pocket
  • Affordable Co-pays and Co-Insurance
  • High Quality Coverage network

It is important to consider the potential savings in medical expenses based on your expected expenses from childbirth and compare these to the differences in annual premium levels to select the best plan for your family.

Evaluating Premium Costs between Insurance plans:

Consider the potential savings in medical expenses based on your expected expenses from childbirth and compare these to the differences in annual premium levels to select the best plan for your family.

2. Obtaining Life Insurance

The first time you hold your child in your arms is one of the most wonderful moments of being a first time parent. Your natural instinct to care for and protect them kicks in right away and what better way to ensure you child is protected than to not only ensure their safety and financial security now but also secure their future against unforeseen events.

As a new parent, the idea of life insurance is a difficult concept to get comfortable with as it means you must accept that you may not always be able to be there for your family. This is a personal choice but I would encourage everyone to evaluate their personal situation to determine if life insurance is a good choice for their family.

Employer Group vs Individual Policy

There are two primary ways life insurance is typically purchased by families: 1) Employer Group Policy; or 2) Individual policy.

Employer Group Policy:

Life insurance purchased through work generally seems like a good option as it is convenient, premium costs are relatively cheap, and typically there is not a requirement for submission of the applicants medical history for the available coverage levels offered by many employers.

The major downside for this coverage option is that you must maintain your employment in order to keep your coverage and the price for coverage is usually adjusted annually.

Individual Policy:

These policies are typically purchased through an outside broker or sometimes directly from life insurance companies.

There are several variations on available policies including Whole Life, Term, and hybrid insurance products. Policy sizes for individual policies are typically available in significantly higher coverage levels than employer group policy options.

While Individual Policy life insurance does usually require submission of the applicants medical history and completion of a medical exam this option allows for significantly higher coverage levels, longer term coverage periods, as well as customizable coverage options. Many of the options in this category also protect applicants from the risk of finding themselves uninsurable as the policies lock in premium rates at the time of application so the cost of coverage does not materially change in the event of a serious illness or other medical condition.

3. Establishing a Will and Trust

Establishing a Will and a Trust ensures that your assets and any insurance policy proceeds go directly to your loved ones. Without a will, your assets could be tied up in the courts and leave your loved ones without needed financial support. Additionally, if the beneficiary of your will is a minor, a trust must be established to manage any assets on the minors behalf until they have reached the age of 18.

While establishing a will and associate trust can look different depending on the individual needs of each family below are common ways one can set up these legal documents:

  1. Do it yourself: Legal Zoom offers affordable and easy to use options to set up a basic will and trust for those who want simplicity and affordability;
  2. Work Legal Plan: For those who participate in a legal plan through employer benefits, wills and trusts are generally covered at no additional cost with several local law firms; and
  3. Private Attorney: For those who want one-on-one service and fully customized will and trust plans. This tends to be the most expensive option but allows for full customization and direct legal expertise your individual circumstances.

Final Thoughts

Now that you have set up the basic building blocks for a solid financial foundation you should feel confident that you have set your family up for a successful future.

For more tips and advice lookout for additional articles by Responsible Dad!

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© 2017 Responsible Dad


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