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PreggyFinance Founder Asks Wells Fargo Bank How Best to Budget for Parenthood

PreggyFinance Founder Asks Wells Fargo Bank How Best to Budget for Parenthood

We took a look at our reader’s FAQs on budgeting for parenthood and sought help from an expert to get you the best answers.

Preparing for a baby can be a rollercoaster at times especially when trying to wrap your head around the costs involved. Whether you are embarking on a fertility journey, using a surrogate, conceiving naturally, or adopting, the expenses can seem overwhelming. Don’t worry we are here to answer some of your most burning budgeting questions with help from an expert. PreggyFinance.com founder, Nafeesah Allen, asked Michael Liersch, Head of Advice and Planning at Wells Fargo frequently asked questions from PreggyFinance.com readers. Take a look at what he had to say.

Nafeesah Allen: For people looking to get loans to help with their fertility journey, what financing options exist?

Michael Liersch: First, look into your employer or insurance fertility benefits, and see what may be available to you. If you are uncovered or partially covered, there are a number of options for fertility financing via a fertility clinic or financial services providers. Your credit score will be a key component to determining your access to loans and getting a good interest rate. And with so many lending options, it is good to shop around to determine the right lending opportunity for you.

NA: Many people decide not to have kids because they don’t think they can afford them. What can people do to save up or put themselves in a better position to become parents?

ML: The choice to start a family is personal and there isn’t a single right answer for everyone. Making the decision to have or not to have kids can be fraught with emotion and amplified by external pressures.

For those who do hope to start a family, the costs and financial responsibilities of parenthood can be daunting. New parents can expect to increase spending on medical bills, childcare, insurance needs and the day-to-day necessities.

If you are considering starting a family you should start by prioritizing your goals, an essential step to create your savings plan and budget. Without this, you will save without a clear plan, which could lead to not meeting your desired outcome and pushing aside your goals for in-the-moment purchases.

Some initial steps to goal identification and prioritization:

1. Name and describe your parenthood goals – in your own words. There are many expenses when you become a parent, so which ones do you want to be the most prepared for? Maybe you want to set aside some emergency funds for medical bills or unexpected doctor’s visits. Do you need some more funds to purchase a stroller, car seat, or a crib? Or maybe you want to start saving some money for your future child’s/children’s car or college tuition. By specifying these goals, you can determine the exact amount of savings you will need.

2. Assign a time period and a dollar amount. Once you have those ideas “on paper” or “in app” – like the digital financial planning platform, LifeSync, on the Wells Fargo mobile app, which aligns customers’ financial goals with their values and aspirations – you can start to think more about them. Specifically, what are the dollar amounts you need and over what period of time to get that goal accomplished? That will help you be honest with yourself about progress to all of your goals, and whether you’re truly using money in alignment with your values – which is what 9 out of 10 (91%) of Americans in the Wells Fargo Money Study said they wanted to prioritize when it came to managing their money.

3. First things first… and where possible, give even lower priority goals some regular and consistent attention. The question really is: how do you manage daily bills while also carving off a little for your future family? This is where no amount is too little. In other words, figure out the amount of money you need to dedicate to your essential goals. Then, with what’s left over, you should try to dedicate even tiny dollar amounts to your more discretionary, less time-sensitive goals – and do it with regularity (same time every month/year) and consistency (same dollar amount every month/year). Why? This will keep the goals top of mind, help you make at least some progress, and also keeps you focused when you get that promotion at work or that tax refund to use the money more intentionally. In other words, you’ll be more likely to use those windfalls toward that stroller you have always wanted or contribute a little bit extra towards your child’s future college fund – rather than using the money in a way that you haven’t thought through, and even might regret. 

    However, while planning to save is important to achieving your parenthood goals, actually sticking to the plan can be very hard. Life gets in the way. Finding time can be difficult. And people often feel overwhelmed by their finances – the Wells Fargo Money Study reported more than half of Americans (55%) report having a love-hate relationship with money and that they sometimes overfocus on how much money they have or don’t have (60%) and always worry about money even when they have enough (56%).

    Tips to create savings goals and stick with them: 

    1. Set small, achievable and specific goals for yourself. If your goals are too lofty, it is harder to track progress and stick with it. For example, start small by setting aside $10 per week to put into your savings account and over time as you are hitting your goals consider increasing the amount you are setting aside each week. This $10 per week will accumulate to $40 per month – seeing your savings grow will inspire you to keep going.  

    2. Get out of your head. When money goals are all in your head, it can all seem too big, and broad, and scary to properly conceptualize. Behavioral science shows that feeling overwhelmed can cause human beings to be inert or do nothing. To get past that inertia, people need to take all that stuff out of their minds and start to record it either on paper or in a favorite goal tracking capability in bite-sized chunks.

    3. Don’t go it alone. Another great way to stick with your goals is to set saving goals with someone else. About half (46%) of Americans in the Wells Fargo Money Study said that their family has helped them improve their approach to money – by far more than any other source. So, getting that trusted family member, friend or professional to hold you accountable and celebrate your wins with you goes a long way

    NA: How soon can parents open custodial accounts for their children and how do they function? Other than a 529 plan, what other college savings options are out there?

    ML: Designing an affordable education plan can help you make the most of your child’s educational experience; and its virtually never too early to start. Outside of a 529 plan (where you can open the account and start contributions for the beneficiary when they are assigned a Social Security number), it is important to investigate other opportunities. For example, you can go to studentaid.gov as a useful resource for various types of student aid and loans to evaluate your options; there are relatively new options available as of last year, so if you haven’t taken a second (or a first) look in quite some time, it is critical for almost every parent and student. And there are other educational savings vehicles like a Coverdell Education Savings Account (ESA), which has tax benefits but have more prohibitive income and contribution limits tied to it (relative to a 529), or custodial account referred to as a UTMA (Uniform Transfer to Minors), which can be less tax advantageous, but more flexible in terms of how the money can be used (again, relative to a 529). Doing your research well in advance of them going to school can help you pick the right (affordable) option for you because you’ll have done the hard work ahead of time. And don’t forget, others – like grandparents – can help make contributions, too!

    Also, consider using a digital tool like LifeSync, in Wells Fargo’s mobile app, which allows you to set as many financial goals as you’d like, like saving for college, and track that progress to be able to eventually make that goal become a reality. You can even upload pictures of your education goals (your dream college!) from your own photo gallery in LifeSync to inspire you to make progress. It also has a tailored content feed (Newsfeed) so you’re aware of industry trends that may impact your goal and keep you well-informed to ensure you’re continually making progress. In fact, our featured content in LifeSync’s Newsfeed is what we call “Money Minute with Michael” (which is me!) on how 529s can help you achieve your education and financial goals. One tidbit that has really resonated is that many people don’t know you can now roll over a 529 into the account beneficiary’s Roth Individual Retirement Account (IRA) – so the money goes from supporting education to retirement (limits apply). There’s so much you can learn in a minute!

    Proper planning and budgeting for you and your baby’s future can ensure your financial security and make you able to weather any unexpected expenses down the road. Follow our expert’s advice and look into loans, employer health benefits, insurance plans, savings plans, government benefits and aid, tax credits, and use available resources like pregnancy apps to help you set and stick to your financial goals.

    If you’re still not sure how to budget and prepare for the costs of pregnancy and parenthood check out our ultra-comprehensive Preggy Finance video course and use it as an all-in-one money guide for your parenthood journey.

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