Financial Strategies For
New Moms And Dads

By: Ginine Castillo
Special to the Oahu Island News

Having children changes your life, in more ways than one. Not only do you add the joy of caring for that energetic bundle to your routine, but you also add a whole new look to your personal economy. And the price tag for parenthood can be hefty. The U.S. Department of Agriculture estimates that it costs a middle-income couple more than $145,000 to raise a child to age 18 (excluding the costs of childbirth and college). So how can you make sure your personal economy is prepared for your new arrival? Here are some pointers to ease the financial stress during your joyful parental journey:

Plan ahead: If you or your spouse intend to stop working to care for your child, it’s likely your earnings will drop. If time allows before your baby’s birth, “practice” living on your new budget to ease into the transition. You should also try to eliminate as much debt as possible to help reduce monthly expenses.

Adjust your spending habits to free up needed cash: A childless life-style may have let you take an extra vacation or treat yourself to regular nights out on the town. While you may not need to give up every luxury, consider adjusting your living standard to accommodate the extra expenses you’ll soon have. Ask friends and family members who are parents to share their own experiences so you have realistic expectations about the less obvious costs of parenthood.

Start a college savings program early: With college costs rising faster than inflation, educating today’s newborn will likely create drastic changes in your personal economic situation, even if that is nearly two decades in the future. Since there appears to be little relief in sight for the cost of higher education, you can realize the urgency of establishing a college fund while your infant is still in the cradle.

If you start planning early, the extended time frame allows for a more aggressive investment strategy for the first several years (to stay ahead of rising tuition costs). But, as college gets closer, you may want to shift to a more conservative portfolio mix. Consider investing in a 529 college savings plan that offers an age-based option if you want an investment strategy that will make these time-based portfolio adjustments for you.

Maximize your own retirement savings: Taking financial responsibility for your children shouldn’t take the place of financial responsibility to yourself. While saving for your children’s education, you shouldn’t lose sight of your own long-term goals, such as saving for retirement. If you haven’t made any investments for retirement yet, consider starting now. If you are already investing for retirement, continue making systematic contributions to an investment plan, including a 401(k), 403(b) or other retirement plan, a dividend reinvestment plan or a mutual fund automatic investment program. You may also want to consider increasing your contributions if you feel you could be under-funding your retirement investments.

Regular contributions also provide the benefits of dollar-cost averaging – a simple but powerful long-term investment strategy where you automatically buy more shares when the market price is low and fewer shares when the market price is high. Even though this strategy does not guarantee a profit or protect against loss in declining markets, it can decrease your average cost per share over time if you continue systematically investing throughout periods of low and high price levels.

Protect your family with cost-effective insurance: Your newly added responsibility makes life and disability insurance coverage an even more vital part of your personal economy than in the past. An accident or illness that keeps you from working or causes your premature death could be catastrophic for your growing family. For most people, affordable protection is available that will help your loved ones maintain their lifestyle in the event of an unforeseen tragedy and knowing your family is properly protected may help you sleep better at night, assuming your new baby lets you.

Get your estate in order: At a minimum, work with an attorney to make sure you have an up-to-date will with your legal intentions clearly spelled out. If something changes in your life – such as the birth of a child – your will needs to be amended by executing a document called a “codicil.” Remember, if you die without a will, a court administrator will not only decide how your assets are distributed, but he or she will also determine guardianship of your minor children.

Even though becoming first-time parents may seem financially overwhelming, most agree that the joy it brings is well worth the cost. Keep in mind that you don’t have to manage your personal economy on your own. A professional financial advisor can help you develop a plan to secure your family’s financial future, so you can relax and enjoy the beautiful life you’ve created.

Ginine Castillo is a financial advisor at American Express Financial Advisors Inc. She can be reached at 952-1188 or by e-mail: The information provided in this article is for informational purposes only. It is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.