It’s Best for the Baby

What’s Best For The Baby

Shortly after my son was born, I saw an ad for a bassinet that mimicked the movement a baby felt while in the womb. This product promised to soothe fussy babies to sleep. The price tag? $1,200! For something that the baby would outgrow a mere six months after they were born.

The baby care market is a $47 billion industry that is fueled by convincing new parents that they need to buy all kinds of stuff that the baby either will never use or will grow out of quickly. But babies actually need very little. I’ve heard many a story of babies sleeping in a drawer when they came home from the hospital. What if instead of buying all the gear that we thought we needed, we put that money to better use?

Skip the fancy gliders, changing tables, and other accoutrements (don’t worry, your kid won’t know the difference) and invest in the following:

Get Life and Disability Insurance

You now have a new dependent. If your baby depends on your income, then you need to protect those earnings. For life insurance, stick to term policies (they are cheaper and cover just your insurance need). For disability, make sure you have both short and long term coverage.

Open a College Savings Account

College costs are increasing faster than the rate of inflation. By starting now, you have 18 years to let those investments grow. Consider using a 529 college savings plan or a Coverdell Educational Savings Account, and make automatic monthly contributions. Even $20 per month will add up. One of my colleagues started at $50 per month and set up his account to automatically increase each year by $50 a month. He’s now saving $350 per month, and because of the automatic and gradual increase, he barely noticed.

Contribute to a FSA/HSA

Save money on a variety of child care expenses by utilizing a Flexible Spending Account (FSA), and save money on health care expenses by using either the FSA or Health Savings Account (HSA). These plans allow for tax-deductible contributions, so the higher the taxes you pay, the more you save. Just be careful of the FSA use-it-or-lose-it provisions and make sure to drain the account by the end of the year.

Create an Estate Plan

Who would you want to take care of your child if something happened to you? This is the time to create or update your estate documents to make sure that you control what happens if you predecease your child. It’s not pleasant to think about, but deciding now is better than hoping a court will make the best decision for your child.

Admittedly, a life insurance policy or drafting an estate plan is far less cute than a cart full of new clothes. But these are the things that you really need to keep your baby safe and well cared for.

Neela Hummel

Neela Hummel is a financial advisor with Abacus Wealth Partners.

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