A tiny new baby comes home with a mountain of money issues for its overjoyed, overtired parents. Here are the most common ways parents go wrong, and why these financial flubs can be so costly in the long term.
To most new parents, getting settled with a new baby means figuring out how to function on three hours of sleep and finding what detergent will best minimize spit-up stains.
Financial issues rarely get the time of day, even though numerous important issues crop up once you have a child.
As a result, many new parents put their family's long-term financial security at risk by making rash decisions or avoiding issues altogether.
Here are 10 of the biggest mistakes that new parents make when it comes to their finances:
Skimping on life insurance
Once you become a parent, having enough life insurance is essential. "If one or both parents dies, you have to make sure your dependents will be provided for," says Lynn Ballou, a financial planner in Lafayette, Calif.
While you may have some life insurance coverage through your employer, "that's usually not enough," Ballou says. "Anyone with a kid these days should at least have a $500,000 policy as a bare-bones minimum," she says. What's more, if you are healthy, group policies are rarely any cheaper for you than an individual policy, and they aren't portable. If you get laid off, you lose your life insurance. "Imagine if you got laid off when you were having medical problems. Getting a new policy would be extremely expensive," Ballou says. "It's much smarter to simply get an individual policy."