Dear Lauren… I’m a Mama Bear (5/2/2025)

I’ve been receiving many messages in response to this newsletter - and I love them! Keep them coming! A few in particular have included a lot of planning questions, so I’ve decided (with permission from the inquirer, of course) to share some of my responses for the benefit of others who may be in similar circumstances. 

Dear Lauren,

I hear you have some excellent knowledge and tons of experience about personal finances. I could really use some advice. 

Me: I'm expecting baby #2 in 4 months and I don't know what I need to plan for. My husband has a great job, but I don't plan on working (at a steady job) for at least the first year after the baby is born. What expenses and other things do I need to be thinking about now and when the baby is due? I also have a 4 year old and have about $10,000 in his 529. Should we continue contributing to it and at what point should I feel good about how much is in it? Should I be putting it in a savings account instead or utilize the 529 more? HELP!

Thanks,

A Financially Stressed Out Mama Bear 🐻 (who is a planner)

Hi Mama Bear,

Thank you so much for reaching out and congratulations on your growing family!!

There is certainly no shortage of stressful thoughts as you welcome a baby, even if you're not a first time mom. There are some financial considerations you can try to address now to give you peace of mind later. 

🚼Think about how your expenses will change. 

You're growing from a family of 3 to a family of 4, so it's reasonable to expect that your regular expenses will see a permanent boost. 💸 Growing your family by 33% thankfully doesn't mean your expenses will go up at the same rate, but do think about which of your current expenses will be more expensive (think, health insurance premiums, additional life insurance coverage) and what new expenses you can expect (diapers, child care, formula.) 

If you can estimate what your new household expenses will look like, you can try to start limiting your discretionary spending now to accommodate the extra costs. This will make it a bit easier to adjust financially when the baby arrives, and give you the opportunity to build up a small pile of cash that can help with hospital bills or go into a new 529 account. 👩‍🎓

🚼Having a baby is a great excuse to revisit your insurance coverage. 

If you are lucky enough to go through open enrollment before your due date, you can have the opportunity to make adjustments to your plan for the best coverage for prenatal care as well as labor and delivery. You may also want to consider funding a FSA for your anticipated out of pocket medical expenses. It's likely you'll hit your deductible with delivery alone, so I recommend funding the account with pre-tax dollars for at least your deductible. Once the baby is born, this is a qualifying life event that will allow you to make changes to your coverage, including adding your newborn. 

🚼Health insurance is not the only coverage you'll want to revisit. 

Growing your family is a great reason to consider increasing your life insurance coverage. Chances are even if you have life insurance now that having another child who will be dependent on you for care likely means you'll need a larger benefit amount. Even though you're not planning on working full-time in the near future and your husband will be providing the bulk of financial support, it's still very important that BOTH of you have adequate life insurance coverage. Many couples make the mistake of assuming a stay-at-home parent doesn't need life insurance because they don't have income to replace, but as moms we know the value of what we provide to the household. If something were to happen to you, Dad would need to either spend more time away from work or hire at least one person, if not more, to fill your childcare and homemaking roles. It's estimated that the equivalent salary for all the work a stay at home mom does is over $150,000/year. 

The catch? Being pregnant is considered a pre-existing condition, so it'll be easier and less expensive to apply for life insurance after the baby is born. Make sure Dad has insurance outside of employer coverage, too. Too many people lose their group coverage through an employer if they become sick and separate from employment prior to passing. It's far less risky to obtain term insurance outside of an employer plan. Happy to discuss appropriate coverage amounts as well as term vs. whole if that would be helpful. 

🚼Now is also a good time to think about updating your estate documents. 

At a bare minimum you need a will specifying guardianship, but may also want to consider healthcare directives/POA or a living trust. If you already have these documents you'll want to ensure they are accurate and updated after the baby arrives. 

🚼As far as the existing 529 is concerned, feel free to continue to contribute as long as your increased expenses allow you to comfortably continue to save. 

529 contributions are an excellent example of savings that can be cut back during transitional periods or when cash flow is tight, but I'm not concerned about you overfunding it. Your goals for supporting your kids with their education will dictate how much you'll want to save in a 529, but there is a general rule of thumb if you're hoping to cover 4 years of undergrad -- the 3/6/9 rule. If you don't plan to use the 529 for any K-12 private education or pay for graduate school, the 3/6/9 rule can help you figure out how to save to cover a 4-year degree. Generally speaking, $3,000 of savings per year from birth to age 18 will result in enough savings and growth to cover 4-year public, in-state tuition. $6,000 of contributions per year from birth to age 18 should cover 4 years of public, out-of-state tuition, and $9,000 per year for a private college. Overfunding 529s is not often a big concern, but I do often see parents prioritizing 529 contributions higher than their own adequate retirement savings, so my recommendation is to be on the same page with Dad about your goals for college and then prioritize appropriately. You will always have the opportunity to help with school out of cash flow or via loans when the time comes, too. 

This should help you get your financial house in order and sleep well at night.....at least until those middle-of-the-night feedings start 😴

Wishing you all good financial health.