THE FOLLOWING IS AN INTERVIEW BETWEEN CERTIFIED FINANCIAL PLANNER BRUCE HAGAN AND ANGELA HOWARD:
ANGELA - There is a great deal of joy in having a baby but parenthood also entails a number of responsibilities. What are some of the financial steps parents should take?
BRUCE - The first is merely an administrative step and that is to apply for a social security number for your child as soon as possible. This gives the child further identity and allows the parents to take advantage of tax benefits when you file your taxes.
ANGELA - As a parent you want to protect your child. How can you do that financially?
BRUCE - You need to obtain some life insurance. If something happens to you or your spouse you have to be sure your dependents will be provided for. If you can only afford or choose to get term vs. whole life that's o.k. As a rule of thumb the face amount should be at least four times your annual earnings, plus the total amount of household debt. You might also consider disability insurance if you don't have it. You absolutely need a will, if for nothing else, to designate guardians for your children and an executor of your estate.
ANGELA - O.K. that covers the basics of protection. What about savings for the child?
BRUCE - You can never start too soon saving for college education. The most popular vehicle is the 529 plan which gives you some great tax advantages. You can be the owner with your child as the beneficiary and anyone can contribute to it: grandparents, uncles and aunts, etc. This is also a time for you to take a hard look at your finances and design a realistic plan to pay off debt. That's difficult at a time when your expenses have just increased, but as a parent of two who are now in college, I can assure you it doesn't get easier down the road.
ANGELA - Any other final thoughts?
BRUCE - Your children will learn their most valuable lessons about money from you so set a good example. Research indicates you can start talking to children about money around age 3 or 4. At age 6 or 7 help them open a bank savings account. In high school they may have after-school or summer jobs. The more you prepare them for the real world the better.
To contact Bruce, scroll down to the Related Links section of this story and click on the link.