Review: The Wall Street Journal Financial Guidebook for New Parents

Every other Sunday, The Simple Dollar reviews a personal finance book.

new parentsIn 2005, my son was born. To say we were unprepared for it is an understatement. We bungled through the entire thing, not saving appropriately for expenses and not really understanding how much this little child would change our lives, financially or otherwise. With a little bit of preparedness, we could have rolled through this, but his emergence sent us into a financial tailspin.

Financial preparation for having a new child isn’t really that hard, but there are a handful of key things that you really need to think about and take action on. The middle and late stages of pregnancy give you six months to get ready for that new arrival, after all, and there are several important things to do shortly after birth, as well.

Stacy Bradford’s The Wall Street Journal Financial Guidebook for New Parents was pretty much written for the exact place we were at in mid-2005. I think it makes a perfect complement for parents who read What to Expect When You’re Expecting and make a genuine effort to understand what’s going on with their pregnancy and early parenthood needs.

I truly wish we had a guide like this during Sarah’s pregnancy. It would have been incredibly useful. Let’s take a peek at what’s inside.

Your Maternity (or Paternity) Leave
Quite often, the impression of maternity (or paternity) leave is far out of line with the reality of it. A couple gets pregnant, then believes they’ll have all the time in the world off to bond with their child. After all, they have plenty of sick leave… right?

Not so fast. Many businesses and organizations have really draconian policies about time off for a new baby. They’re required to allow you to have twelve weeks off, but they don’t have to pay you for it. For example, when our first child was on the way, we believed for a while that my wife would have three months off to take care of the child with pay, and I’d have six weeks off.

Not true. Sure, we could take that time, no questions asked. But much of that time was actually without pay, even if you have enough sick leave to cover it.

What’s the solution? Find out now what the maternity and paternity leave policies are for your organization and, if you’re expecting to take time that’s unpaid, start building up your emergency fund to a nice, fat level so you can blow right through that unpaid period.

Kissing That Cubicle Good-Bye
The stay-at-home question can also weigh heavy on newly-expectant parents. Should one of the parents walk away from the workplace and stay at home with the child? It can be easy to do a very simple run of the numbers and conclude it’ll work – sure, you lose $X of take-home pay, but you’ll be eating at home more and your tax burden will be less and you can drop a vehicle and so on.

But that back-of-the-envelope calculation can be really dangerous. There are a ton of things to consider. What about health insurance? Will there be a cost increase if one partner puts his or her spouse and new child on their insurance? What about the missing retirement savings? Can the employed partner bump up their retirement savings a bit to account for the lost savings? It’s vital to sit down and write a realistic, detailed post-baby budget and see whether or not it can really work.

Returning to the Grind
Child care is pricey no matter where you live, so if both partners do return to work, you will be dealing with a whole new financial world. Our daycare fees were shocking once we started getting into the routine.

Be creative with this situation. Talk to your employer and see if you can adopt a different work schedule. Perhaps you could move your “weekends” to Thursdays and Fridays and, with your partner covering Saturdays and Sundays, you only need to pay for three days of child care. Maybe you could work an alternate shift, or telecommute a few days a week. Have both partners look into these options – if you’re a good employee, an employer will work with you on this.

Who Says Uncle Sam Doesn’t Care?
The federal government offers tons and tons of tax benefits for the parents of children. You can deduct child care, education costs, health care costs, even the value of any outgrown clothes that you donate to Goodwill.

But there’s a trick (isn’t there always?). You have to be aware of these tax benefits, plus you have to keep track of your spending on them. If you donate clothes, you have to keep receipts. If you have an education expense, you have to keep track of it. Then you have to remember all of this at tax time and figure out how to claim all of these things. An accountant helps – we’ve had great success with TurboTax.

Where Should You Nest?
Having a baby in a tiny urban apartment can be very difficult. There’s not enough space, the costs for everything are high, and getting the baby around can be a real challenge. When a couple has children, they often seriously consider moving to a better location, one more suitable to the challenge of raising a child.

But to where? The suburbs? Costs can be cheaper there on some things, but commuting can be expensive and suburban life (in its own way) can be more challenging than living in a city. I’m pretty partial to living in rural areas, myself: plenty of room for children to explore, lots of free stuff to do, and tons of fresh air.

Don’t just go for the simple answer. Do some research and also do some thinking about your real needs and the needs of your child.

Finding (and Paying for) Mary Poppins
If you’ve decided that child care is right for you, how do you select it? What can you afford? What should you look for within your budget?

I would love to have a nanny for my own children, to tell the truth. I’ve nearly begged my sister-in-law, who has many years of child care experience, to consider the position. I’d be happy to pay her at least as much as we currently pay for child care, plus provide room and board for her, but she’s following her own path.

Aside from her, I have trouble imagining myself entrusting my children’s care to just one person. I value a lot of peer review – situations where one adult I don’t know well isn’t giving care without peers.

These are some of the considerations worth investigating – and they’re worth plenty of time to investigate and calculate. Don’t just jump for the first opportunity you find.

Avoiding a Health Scare
Here, Bradford makes a very strong case for health savings accounts which allow you to pay for your child’s health issues with pretax dollars. This is a great idea if you have these accounts available to you – they can make dealing with unexpected medical expenses that much easier.

As with anything, though, there can be tricks. Know exactly how your account works. Does it carry over, or is there some sort of penalty at the end of the year? How exactly do you get at the money, anyway? Make sure that these things are well-understood by you and by your partner so that this isn’t an issue.

Paying for Harvard
Bradford strongly suggests that it’s more important to save for retirement than it is to save for your children’s college savings. It’s a principle that makes a lot of sense – a good retirement means you won’t be a burden on your children late in life.

So how do you pay for top colleges if you aren’t throwing everything but the kitchen sink at college savings? Bradford offers up a few financial moves, but the biggest one is simply letting your child work through it. If you make everything totally easy for your child, how will they handle adversities later in life? Don’t sweat paving your children’s roads with gold – they’ll learn more if you don’t. Instead, focus on not being a burden on them.

Yes, You Need a Will
The big decision that new parents have to face with regards to a will is who exactly you wish to have as guardians of your child (or children) if something were to happen to both parents.

This is a pretty serious consideration, one we struggled with for a long time. The thought of what would happen to our children if we weren’t there was very, very painful to face. This exploration was valuable, though, because we now feel very comfortable with our guardianship choices.

Trusts: They Aren’t Just for the Wealthy
What about a trust? Many parents don’t even consider this – they get a nice life insurance policy and fill out a will when the children are born, but if something happens to them, their life insurance money goes to the child’s guardians free and clear. Ideally, the guardian will do something responsible, but there’s no guarantee – a surge of money might just mean a new car to that person.

The way around this is to set up a trust. Then, whatever assets you have and insurance money that comes in is handled according to your wishes in the rules you set up for the trust. This prevents the guardian from just blowing the money in a way that’s contrary to your wishes.

Life Insurance: Better Safe Than Sorry
What about life insurance? Obviously, each parent should be insured quite well with the partner as primary beneficiary, and the previous chapter obviously alludes to the idea that a trust should be the second beneficiary.

But how much? And what kind? Bradford outlines a lot of options, but I think a term policy clearly comes out on top. It has the lowest cost and it’s not coupled with a suboptimal investment plan. If you want to invest to “recoup” the cost of your insurance, just figure out the difference in cost between the term policy and the whole life/universal policy and put that amount each month into an investment account of some sort.

Accidents Happen: Are You Prepared?
The book closes with an impassioned argument for disability insurance, which handles the situation of debilitating injury that makes it impossible for you to work but doesn’t end your life. This becomes more vital as a parent because you’re responsible for the well-being of an individual who can’t earn an income for themselves – so what happens if you can no longer earn the income?

The advice is short and sweet: make sure you’ve got 80% of your salary covered, and shop around. Good tactics.

Is The Wall Street Journal Financial Guidebook for New Parents Worth Reading?
If you’re in the target audience described in the title, The Wall Street Journal Financial Guidebook for New Parents is a very worthwhile read. I truly wish I had read this book in 2005 during my wife’s pregnancy.

Even better, this book can be an incredibly useful baby shower gift. If you know someone who’s having a baby shower, include The Wall Street Journal Financial Guidebook for New Parents in the gift you give, particularly if they’re a few months away from delivery. The advice this book provides is vital during the run-up to having a child – there are a lot of additional little tips all over the book, from the small (buying baby items) to the big (considering private school).

The Wall Street Journal Financial Guidebook for New Parents isn’t a world-changer, but it’s a great compendium of really useful information for new and expecting parents, perfect because they’re about to embark on a whole new chapter in their life.

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  1. GREAT great book review. I agree that it’s important to first and foremost just save for retirement and then save for your children. You can carve it up later.

    It’s kind of like the oxygen mask theory if a plane crashes. They say to put on your mask first before helping others.

    Rgds,

    RB

    Rich By 30 Retire By 40

  2. Lisa says:

    This sounds like a good solid volume to have on the shelf. While I’m not planning to have children in the immediate future, it will happen eventually, so this is so helpful to keep in the back of my mind.

    I do have a couple thoughts on saving for a child’s college education, since I work at one of those top (read: expensive) schools. I agree with the idea of saving for your own retirement before saving for the kids. Here’s why:

    First, one of those top schools that everyone seems to aspire to is not necessarily going to be the best fit for your child. Fit with the campus culture (academic and social) is critical to academic and personal success! And it’s not something that can be determined until the campus visits start later in high school and possible major fields are considered.

    The quality of education is just as good at state schools and may provide what they need academically that a top liberal arts school can’t (i.e. they want to go into video game design, which you just can’t find at Harvard). On a personal note, I’m the product of a state school education (kindergarten through grad school!) and I’m doing just fine, thank you very much.

    Also, be realistic about your financial situation with your kids and encourage them to consider less expensive schools, unless they can get the scholarships, grants and financial aid package to cover the $50K+ a year for tuition, room and board at those top schools. I’ve witnessed so many parents literally mortgage their own future to put their kids through top schools; the stress this places on them is insane. Not to mention the impact this has on a child that now feels they owe their parents big time (and therefore MUST. BE. SUCCESSFUL, even if they don’t like the job they end up with, or they sacrifice their own needs and go into a high-wage-earning field to please their parents).

    The student also may or may not value as highly the education they’ve just been handed (instead of earned). Work study jobs were created for a reason! Plus research indicates that students who work about 10-12 hours a wee tend to have better academic performance than those who do not work. I’m a great fan of earning your own education since I had to work my way through college (20-25 hours a week, plus a full credit load). I literally *earned* that degree!

    Lastly, remember that higher education can come in many forms; the traditional four year residential experience is not really the norm anymore. Many students attend community college or a two year center before transferring to a four-year school to complete their bachelor’s. Some earn their associate’s degree at a technical college and get a better paying job than the liberal arts university graduate. Online universities are becoming more and more popular all the time, even amongst traditionally aged students. Others end up quitting college and going on to be hugely successful (Bill Gates, anyone?).

    Needless to say, there is not one path to post-secondary education, nor one way to pay for it. Just my two (or fourteen) cents!

  3. Ellen says:

    Quick addendum to the leave section: your employer (in the US) is required to give you 12 weeks–IF you’ve worked there full-time for a year, and IF they employ more than 50 people. And if you and your spouse happen to work together, you get a guaranteed 12 weeks *combined*, not each. My husband and I are in that same situation: we work together in a small business–which means we get exactly zero days guaranteed if we wanted to start a family, and 6 weeks each if the business has grown substantially by then.

    I mean, our boss isn’t a jerk and he’s big into family, so we’d probably get more time off, but that’s at his discretion. It’s really important to know the details of one’s own situation.

  4. anne says:

    gov’t help w/ childcare costs might be available- we make too much to qualify, which is a nice problem to have, i guess. but where we live, in connecticut, there is a program called care4kids.

    and when i signed our daughter up for preschool at the local y i was surprised to find that on their sliding scale, we weren’t at the top- we get a slightly reduced tuition for our daughter, even though we don’t get care4kids.

    and for years i’ve been working as a school bus driver and as a church nursery worker, because i can bring my kids along. that has saved us a fortune over the years. and my vacation schedule lines up w/ the kids’.

  5. Kelly says:

    The US is the only industrialized nation that does not give a PAID maternity leave. Canadians get 12 months! In the UK, I think it’s almost 2 yrs! FULLY PAID!

    If I have another baby and am employed at my current place, I’ll be LUCKY to be able to afford to take 6 weeks off! They don’t allow you to roll over vacation time like most places do in my area.

    For being the #1 country in the world, the USA is certainly backwards on a lot of it’s practices.

  6. SwingCheese says:

    I was able to take 6 weeks paid and an additional 6 weeks unpaid. My husband and I calculated the cost, but we forgot to account for the fact that my insurance was going to increase when we added our little one, and so took a bigger chunk of our expenses than we had first thought it would. We had enough saved to cover the time until my new contract begins (as a teacher, I’m contracted yearly, and so the loss of salary was divided up throughout the remaining pay periods for the 2008-09 school year), but it was still a surprise.

  7. Joe M says:

    One Note, I am an attorney with a decent amount of estate planning experience. While trusts are great, they can also be expensive. For the typical parent(s) a custodianship works the same but is cheaper. Ask you insurance company what their requirements are to pay to a custodian using your states UTMA/UGMA (Uniform Transfers/Gifts to Minors Act). One caveat, while cheaper Custodianships do not have the same oversight as trusts, so make sure you TRUST the custodian.

  8. First point, Canadians do not get 12 months paid leave. I work for a company right on the border of Ontario, in the US, and have a number of Canadian friends. One in particular, her spouse worked for a Canadian trucking companY and decided to take the 12 months leave. It was unpaid. What Canada has is that it will guarantee your job security with the company for that 12 months.

    Second set of points are long so I will leave a second comment.

  9. Wife and I had triplets May 28th so we are going thru this now. They’ve been in the hospital since, due to their prematurity. And they will be there for another month at least.

    We work for the same company. They gave her six weeks which she had to take when the babies were born. So…complete waste, except to give her some time to heal from the C-Section. They give me nothing. I have to take my vacation time or go on FMLA in which case, they burn ALL of my vacation first, and then stop paying me.

    I work for one of the largest financial institutions in the world, by the way, so this isn’t some tiny company.

    Anyway, the six weeks were up in July and so we had a decision to make. Our work has daycare but it costs $2600 a month for triplets. She brings home $2200 a month.

    If we had the foresight in October of 2008 to plan, we could have signed up to max out our FSA accounts for 2009. The company matches up to a third in the FSA’s but the max is about $5000 a year between the two of us, so that would have helped a bit, but not a ton. We still would have run a deficit on daycare. I wasn’t aware that you could tax deduct it.

    So she’s left the job and is preparing the home for the children, as well as spending six or more hours a day at the hospital with them, feeding them, changing them, holding them etc.

    Now we are down to just my income. I had the foresight to bust my arse and pay off our home, but am still scared about the bills to come. We live in a small home, about 1300 square feet. Fine for now, but the back yard is quite tiny too. It takes me five minutes with a push mower to mow. Would like more property for the children to play on, but we can’t afford that right now.

    When they were born, I started pouring thousands of dollars into their 529 Savings plans for schooling. Now, based on Trent’s review, I am second guessing that, as I backed my 401 down to 4% to get the full company match of 6% and I only contribute $1300 a year to my Roth via bi-weekly contributions. Probably should bump up the retirement. I’m not young. I’m 36, we came to this baby thing late in life.

    I’ve got the $500,000 term insurance on myself because that’s all the bank would sell to me. On my wife, we have nothing.

    Of course, health insurance costs me more now too, with four dependents plus myself.

    I don’t have a Will yet and we don’t have guardians set, should we pass away. Just trying to see if my babies survive yet, which their chances get better every day.

    All of this is fine, I’m not complaining. Just wondering if I made the right moves and quite scared for the future.

  10. WilliamB says:

    One more cost to remember, if your family goes from two working adults to one working adult and others at home: increase in utility costs, especially heat/ac. This is particularly true if you adjust the house temp when you leave. Guess what – now there’s always someone at home.

    All US’ans: My friend the OB says that because 6 weeks’ recovery is the norm in US medical practice, it should be easy to get a letter from your OB saying so. If you have such a letter, then your company has to let you use sick leave for this 6 weeks. (Most companies, at least, small ones may be subject to different laws.)

    Charley – did y’all chose not to cover your wife, or was that the result of financial constraint? If the former, please reconsider. As you already figured out, childcare can be pricy. If the latter, my sympathies and I hope you get afford coverage very soon. Maybe it would make sense to have some coverage on each of you instead of all of it on you?

  11. kk says:

    Small semantic point. I wouldn’t call these expenses “emergency fund” expenses, since you know they are coming. So, it might be more appropriate to say, start setting aside money in a “baby fund”.

    As to Kelly #3’s point about the US, I believe that folks in both Canada and the UK pay quite a bit more taxes. Nothing is for free. Someone is always paying…

  12. Good point, William. No coverage on the wife, because it’s another $100 a month bill. I will reconsider based on your opinion, but not till I see what the first couple of months expenses will be with the babies home.

  13. life insurance is a little bit complicated to understand sometimes!

  14. earme says:

    If you’re setting up a trust and have a retirement plan that you intent to pay to the trust, be sure to read the details SUPER close. Some retirement plans have it worded so it will pay MINIMUM benefits to the trust. My sister in law is going through this now (her husband died suddenly about a month ago). She will only get minimum benefits from her husband’s plan until both of her children are out of college (about 8 years). If it was set up to pay to her directly, it would pay at some amount until she passes on. She’s been a stay at home mom since her children were born (the oldest will be a junior in HS) and her husband’s retirement plan was a large part of their planning. And they did plan, very very well, but missed this detail.

  15. David says:

    I wish I had this book before the birth of our son as well!

    Good review, good choice of book.

    It brings up a wealth ofgood points that really need to be thought about before the birth of a child

    Thanks

  16. Kelly says:

    Canadian birth mothers receive 15 weeks paid maternity leave at 55% of their income up to $435/week CAD.

    That’s a heck of a lot more than what we US citizens get!

  17. plonkee says:

    In the UK you get 12 months with a guaranteed job to return to, if you return within 6 months it will be your old job (otherwise it will be a comparable one). The first 6 weeks maternity leave are at 90% pay, the next 33 weeks are at the statutory rate (about £120 per week?). The first 6 weeks are compulsory (basically, you may not return to work). Fathers get 2 weeks paternity leave at the statutory rate.

    For adoption, you nominate one parent as the primary carer and they get the same deal as maternity leave, the other parent gets the same deal as paternity leave.

    Many employers offer better benefits – I’ve worked for a company that offered women a back to work bonus of around £1500 if they returned within the 12 months and stuck it out for a year.

  18. While considering all of the financial alternatives and plans available in having and raising kids, it’s also important that you adjust your lifestyle and expectations.

    A child changes everything, especially a baby. They can do nothing on their own, you have to do it all. That’s a recipe for stress, especially if both parents work.

    You have to completely change your schedule, which is now dominated by junior. It’s almost paradoxical, but not only do you need to slow down and realize that you may not accomplish all that you plan on a short term basis, but having some sort of loose plan becomes more important than ever because time and energy are limited.

    You really have to be more oganized than at any time before having kids. You need a plan that you stick with, but one that makes generous allowances for dealing with crisis and also for kick back time to recharge.

    When my wife and I went thru La Maz classes (I’m sure I spelled that wrong) the RN who taught it referred to the first two months after child birth as “baby bootcamp”–that period of time when you’re getting adjusted to the baby and attempting to transition the baby into some sort of routine.

  19. Johanna says:

    I know I’ve mentioned before that it really irks me when parents make up excuses for stiffing their children’s college funds and keeping the money for themselves, but this one takes the cake. Withholding money for college so that your kids will be used to adversity? If that’s how you really feel, why bother being a good parent at all? If you give them adequate food and clothing now, how will they ever handle it when they have to subsist on ramen and free t-shirts while they’re trying to work their way through college? Why not charge them rent from the day they’re born? If they don’t have the money, no problem – just take out some loans on their behalf.

    I know I’ve said this before too: If you’re not interested in giving your kids the best shot in life that you can afford to give them (and I know that “best shot in life” doesn’t mean “college” for every child, but for yours it very well might, and you probably won’t know for sure until the child is almost college age anyway), then maybe you should reconsider whether you really ought to be having children.

  20. ChrisD says:

    They’re required to allow you to have twelve weeks off, but they don’t have to pay you for it

    This is a rotten deal.
    As said above, in the UK you don’t get 2 years fully paid, only 2 years guaranteed return to your job, but in some places your job is only guaranteed for 1 year. But we get more than in the US!
    Germany and Sweden have great provisions, in Germany the mother and father get one year to split between them and the father gets another 2 months of his own (probably not all fully paid though).
    Sometimes I think the US has a lot more in common with 2nd or 3rd world countries. The COUNTRY is rich but the people in it sure aren’t.

  21. Johanna says:

    And regarding parental leave policies: Think about it for a second from the point of view of the non-parents. When you get paid time off for parental leave, that money isn’t coming out of thin air – it’s coming out of everybody else’s wallets. When you take 1-2 years off with a guarantee of getting your job back, your employer has to hire a temporary employee to do the work that you’d otherwise be doing – someone who ends up working for the company for 1-2 years *without* any guarantee of what happens after that.

    Having children is a choice. Why should your choice be subsidized by people who make different choices? Why is your job security more important than that temporary employee’s?

    Another aspect to consider: When I lived in England, I saw a segment once on the news about employers who openly refuse to hire any women of childbearing age. (This is, apparently, legal for businesses smaller than a certain size. Similar discrimination probably happens in larger businesses too – they’re just not allowed to talk about it.) The reason is that employers can’t afford to invest the resources necessary to train someone to do the job, only to have to hire a replacement in a few years when the employee goes on maternity leave. How many women who don’t plan on having children have lost out on job opportunities because of policies like that?

  22. PF says:

    Charley, $100/month for health insurance may be high for your wife unless there are medical conditions. I got a $1 Million policy at the age of 39 for $43/month from an A+ rated company (I’m a female).

    Johanna, I think that helping your kids with college is good, but many of the kids I knew and know now who got the full ride from their parents aren’t really thriving out there. Many didn’t even finish. I plan to save for my kids, but my expectation is that they will provide for some of the cost too to help them actually value their education. I see nothing wrong with raman and free t-shirts…….it worked for me! We’re older parents, so retirement and college may be simultaneous.

  23. Rosa says:

    Johanna, there’s that discrimination here, though it’s less open, and it’s based on health insurance costs (which aren’t an employer issue in the UK) instead of on long maternity leaves. I’ve known a number of women laid off in their 7th or 8th month of pregnancy – you don’t think that goes into the manager’s calculation when there’s a layoff?

    It’s our kids who will be paying the nonparents social security costs in the future, so maybe they should shoulder some cost now?

    I had to quit my job because they wouldn’t give me more than 12 weeks (unpaid) even though, with my problem pregnancy and preemie baby, my 12 weeks were up one week after his due date when I was in no way ready to go back to work. People with surgeries, cancer treatments, and other issue all were given longer leaves while I worked at that company – that attitude that pregnancy is something you choose so there shouldn’t be any support from others is ridiculous. Do you say that to drivers who get in car accidents?

  24. NYC reader says:

    Bringing children into the world is a CHOICE. No one that I know of CHOOSES to have a car wreck, cancer, or heart disease.

    Because you have a choice, you have an obligation to PLAN for that choice. That includes health insurance, child care, education, and everything else this dependent being will require to become a healthy productive adult member of society.

    I can’t imagine how some people seem to give less thought and planning to the arrival of a child than to the purchase of a washing machine.

    The taxation, insurance, and salary structures in the US are full of subsidies for children and married couples.

    Let’s take married couples. Under current US law, if two persons of opposite gender choose to get married, they receive significant financial, legal, and tax benefits not available to unmarried couples of any gender. Having children is not required to receive these benefits. A same-sex couple is not entitled to these financial, legal, and tax benefits, regardless of the individual states’ laws on same-sex marriage, because of the Federal DOMA legislation. Single persons pay a disproportionate amount of their income towards taxes, health insurance, etc. as compared to married couples.

    Let’s take families and health insurance. There are two choices in health insurance plan coverage: single, and family. A married couple with no children pays exactly the same health insurance premium as the Brady Bunch family with two adults and eight children. Why should the childless couple subsidize the Brady Bunch’s health insurance?

    Some subsidies make sense for the overall good of society. People who choose not to have children pay taxes which go toward the education of other people’s children. Rosa’s suggestion that other people’s children subsidize the social security of those who chose to not have children ignores this fact.

    One last thought… the Family Medical Leave Act (FMLA), which is the legislation that required US employers allow up to 12 weeks of leave (paid or unpaid) for pregnancy, health of the employee, or family members, was initiated by a Democratic president and fought tooth and nail by the Republicans. Same story for Social Security. Yet now both are considered sacrosanct benefits by the millions of people and families who benefit, Republican and Democrat alike. Keep that in mind during the current debate over health care in Congress. If health care reform passes, ten years from now we will all be taking it for granted, as we do with Social Security and FMLA.

  25. Andrea says:

    I wont delve into all of the politics of some comments, but will offer what I did with the birth of my 3rd child; coincidentally the only one I had while employed with a leave policy.

    I had six weeks of paid materinity leave, a few days of which I used up early as I needed bed rest just before. Then when that time was up, I went back to working from home 25 hours per week, but took the other 15 as vacation hours.

    My boss was happy to have me back working on the key item I was responsible for (I was glad to be back on it too), but it was not a full time job, so this arrangement worked out really well. I was able to be at home for 17 weeks.

    The interesting thing was that just at the point where baby started needing more attention during the day through his longer awake periods, it was time to get real help and I went back to work. I never felt ‘rushed’ or cheated out of any of the time. In fact I felt blessed that I was able to work it all out this way.

    In case anyone thinks I live a charmed life, it isnt true. Baby #2 came along on a Tuesday and because I wrote the payroll checks for a small company I was back at work on Friday, to make sure we all got paid. It was a very part time basis and because baby slept a lot, he got to come too.

    So it all works out and if you can learn to go with the flow in your work schedule, having kids will also go easier for you too. Dont begrudge the moments you dont get; cherish the ones that you do get.

  26. Daina says:

    I’ll disagree with Johanna on the idea that being ready to pay for college is an absolute requirement of responsible parenthood. Many of my closest friends, my husband and his brothers and sisters, my sisters and I all had parents who had limits on what they felt they could contribute to our college educations. I don’t feel this really limited our potential.

    Our parents raised us to be responsible young adults and adults, and they did everything they could to make sure we were well prepared for the world in college and beyond. As a result, we were able to get scholarships, loans or jobs needed to help pay for high-quality college education, mostly at state schools.

    I didn’t go out-of-state for college like I originally wanted, and my financial situation was half the reason for that. But I don’t feel I lost out at all. So many paths in life were open to me — it’s just that I knew I had to have a plan to pay off any excessive expenses I incurred. And I don’t think that was a problem.

  27. Johanna says:

    @Daina: I think you’ve misunderstood me. I don’t think that parents who can’t afford to pay for their children’s college educations are necessarily irresponsible (although some might be – it depends on their reasons for not being able to afford it). The ones I think are irresponsible are the ones who *can* afford to contribute to their children’s education, but who choose instead to keep the money for themselves, perhaps to fund an earlier or more luxurious retirement, and who come up with rationalizations about how this is for the children’s own good.

    It is my opinion that if parents are retiring early (by choice, I mean – I’m not talking about people who retire involuntarily for whatever reason) and their kids are still paying off student loans, then something is wrong. They *are* being a burden on their kids – they’re just doing it indirectly.

  28. J says:

    @Johanna: My children will likely need to fund some part of their college education. It’s an extension of the idea of “pride of ownership”. On the same token, they will also need to provide part of the funding for things like a car, toys they want to buy (video game systems and iPods come to mind), and things like cell phones/texting. When they have a financial stake in whatever it is, it teaches them the value of a dollar and encourages them to care and maintain whatever it might be.

    For that same reason, I will expect my children to work in some form of occupation when they are able to — and I don’t care if that’s something very entrepreneurial (babysitting, lawn care) or just working for someone else (flipping burgers).

    These above statements apply if I am making $100K/yr or $1M/yr. Kids who are given everything are being done a disservice by their parents — they are being shielded from the cold, hard world of limited resources and prioritization of needs that comes along from being a responsible adult.

    This doesn’t mean that I’m not going to contribute to my children’s education — far from it. But I don’t feel some need to support them through undergrad and grad and PhD and postdoc just because I’ve got the financial resources to — they have to put into some sweat equity, as well.

    Also, when do the children get cut off? Are the parents on the hook for undergrad only? What about if the kid changes majors 5 times and makes undergrad the best six years of their life? It seems that there needs to be an incentive for the kids to move on and not going to the parental bank as long as they like just because they can.

  29. WilliamB says:

    #24 NYC reader wrote:
    “No one that I know of CHOOSES to have a car wreck, cancer, or heart disease.”

    Many people choose a lifestyle that promotes car wrecks, cancer and heart disease. They overeat, eat junky foods instead of healthy ones, don’t exercise, smoke, drive too fast, don’t wear seatbelts or bike helmets, and so on. By your logic I, a runner of appropriate weight who eats a lot of produce and lean meat, shouldn’t have to subsidize those who don’t.

    Getting pregnant is NOT always a choice. Contraception fails. Rape happens. Having the kid… well, that discussion would take us into very touchy territory that is very far from the intended subject. Let’s not go there, eh?

    #24 NYC reader wrote:
    “There are two choices in health insurance plan coverage: single, and family. A married couple with no children pays exactly the same health insurance premium as the Brady Bunch family with two adults and eight children.”

    This is not universally the case in the US. It all depends on what coverage options the employer chooses to offer. Personally I have seen:
    – no coverage,
    – self only,
    – self + spouse,
    – self + 1,
    – self + kids (ie, not spouse),
    – self + family (ie, spouse and kids).
    The only option I haven’t seen (either as employee or as employer deciding what plans to offer) is one that specifies the number of kids. And kids but not the employee, now that I think of it.

    #24 NYC reader wrote:
    Single persons pay a disproportionate amount of their income towards taxes, health insurance, etc. as compared to married couples.

    Most married couples pay MORE income tax than they would as unmarried persons. The standard deductions are lower (=aren’t twice that of single persons) and the tax rates are different. Further, tax law treats a married couple’s income as one income. Since you pay more tax on a higher income, a married couple usually pays more. It’s worst if the two earn the same amount. Instead of two incomes taxed at $50,000 each, they’re taxed for a single income of $100,000. The marginal rate is higher and their total tax bill is higher. If the couple earns very different amounts (say $80,000 and $20,000) the effect is less because the high earner is already paying the higher rate.

    It all depends on the details of income and this year’s tax rates. For a nice walk through of an example, see http://www.fool.com/taxes/2000/taxes000519.htm.

  30. Johanna says:

    @J: Here’s something to think about: I’ve read a lot of people’s college applications, back when I served on my university’s scholarship selection committee. Now, these were top-tier applicants for a top-tier university, so they might not be representative of kids that age in general, but in some ways they might be. And when I think of the ones who really gave the strong impression that they’d had the world handed to them on a silver platter, it wasn’t so much because their parents paid for everything. Rather, it was because the parents (or sometimes teachers, too) had planned everything out for these kids, right down to dictating their very identities. They were told what schools to go to, what classes to take, what after-school activities to engage in, what summer camps to go to, what awards to try for, and so forth. Some of them had some very impressive-looking mile-long resumes, but when you scratched the surface, there was nothing there – because they’d never been given the chance to think or develop for themselves.

    So based on my experience (which, again, is not necessarily definitive) I’d be less worried that I was doing my kids a disservice by paying for too large a proportion of their college expenses, and more worried about forcing them to get after-school jobs flipping burgers if what they’re really interested in is volunteer work, say, or researching a position paper for the Model UN. Who knows – if you encourage them to figure out what they’re passionate about while they’re still in high school, you might even reduce the chances that they’ll change college majors five times and take six years to graduate.

  31. J says:

    @Johanna – volunteering or researching a paper for the model UN, while interesting and Good Things To Do, do not pay the bills. In our capitalist society, one of the most important skills one can learn is to handle money, and in my mind, the way in which you learn to handle money is to, well, handle money. And for a high school age kid that wants a car and an ipod and a playstation and a prom dress and an iphone and sunglasses and clothes and to go out with their friends, the best way to do that is to make them manage their own money for part of it.

    I’m not planning out my kid’s identity. Both my wife and I agree completely that our children WILL have jobs in high school and need to pay for something in college. It may be that we pay tuition and they work for spending money. Or we pay rent while they are in school, they work summers to pay rent — or any number of other permutations. We very solidly believe this.

    This education about money will also start earlier. We fully expect to integrate them into the monthly budgeting process when they are old enough, in addition to teaching about spending, saving and giving as they get older.

    As for what they do, I don’t care. Both my wife and myself have advanced degrees (and might get more). If my kids want to be a diesel mechanic, scrub floors for a living, get a PhD, run a plumbing business, be a stay at home mom, explore Mars, be a ballet dancer, join the military or go off the grid entirely and live off the land, I’m all for it.

    But they will need to support themselves in their endeavors. We’ll support them getting whatever education they see fit, but at some point they need to move on and have their own lives. I just hope that we give them the life skills they need (and allow them to fail a few times while the risk is low) to make it however they see fit.

  32. Parents should make some financial accomodation to help their kids get a start in life, what ever it is. That’s just part of being family and taking care of your kids. But the open-ended, ‘I’ll pay what ever it takes for my kid to get the finest education possible’ is not and should not be a requirement. College isn’t the be all and end all of a young person’s world.

    If he or she has a talent that doesn’t require college, an orientation toward the trades, or maybe needs some time out in the world to even answer the question, so be it. Better that they find what they’re best at than to be forced into a role they aren’t suited for.

    I completely agree with those who say parents can’t plan their kids lives out.

  33. SwingCheese says:

    I’m not sure about all the tax benefits for married couples. I’ve heard several people refer to this, but I’m not sure why my husband and I aren’t getting them. The first year we paid taxes post-marriage, we owed both the federal and state governments.

    The same is true for insurance. As my husband is currently a student, I’m covering both him and our son, and was paying considerably less per month to cover just him. For our insurance plan, at least, a married couple would pay significantly less than a family.

    And lastly, I worked my way through college, and though my parents helped me out, I took out a good amount of student loans for undergrad and grad school. My parents always wished that they’d been in the position to pay for me at the time, but they weren’t. They are right now, however, funding their retirement accounts, and I’m pleased that they are able to do so. I would prefer to make my student loan payments and know that they are taken care of for the future than to try to budget for taking care of my own retirement, my child’s education, and my parents into old age. And I want my son to know that he is not responsible for taking care of us monetarily as my husband and I age, too.

  34. Susan says:

    A lot of good information here, thanks for the thoughts!

    I know this is a book review, but you seem to always agree with rural life over city life — usually just saying it’s too expensive. But I think you should consider it a little deeper.

    In NYC, I don’t need a car, my subway fare is about $80 a month. That means no gas, car insurance, or repairs. Museums are usually free several times during the month, the parks host free concerts, art galleries are usually free and there’s hiking, a wildlife refuge center in queens, the beach in the rockaways, an amusement park, fishing, botanical gardens, zoos, kayaking, and biking — all for free or low cost.

    I have friends here who moved from suburbs and said it was far easier to parent. They claim ‘play dates’ happen more organically and impromptu communities spring up among parents who take their kids to the park in the evenings and on weekends. Nanny shares are also common, or babysitting cooperatives among neighbors — where the cost is free.

    Also, a city usually promotes smaller living space and consequently means less ‘stuff’ to fill it with. My brother and sister in law live in the suburbs and complain about the sheer volume of toys their kids have. In the end, they say the kids play with the same handful of toys day after day and ignore the rest. In an apartment, you’re forced to downsize.

    My husband and I live a very comfortable life in NYC and have zero debt, all while earning an unremarkable salary. My friends who make that same salary in the suburbs in Atlanta seem to struggle. Whether it’s their home purchase, filling it up with stuff, or the cost of cars and gadgets, I’m not sure. But regardless, I think there is an enormous benefit to living in the city and wish you would explore it in a post sometime.

    Thanks!

  35. NYC reader says:

    I’m with Susan (#33) on the economics of city living vs. suburban or rural life. Another benefit of having fabulous public transportation is that kids get themselves from school to play dates to music lessons all by themselves.

    My suburban friends often play “Mommy-Taxi” shuttling kids between dance lessons, music lessons, school, etc. That is a common reason why one parent becomes a stay-at-home parent, significantly reducing family income. In NYC, it’s very easy for both parents to work full-time because the kids get themselves wherever they need to be with a Metrocard for bus and subway fare.

    Real estate here is expensive, either renting or buying, but not having a money sinkhole on four wheels compensates for it.

    You can’t beat the low-oost and free entertainment and educational opportunities that are available. It’s also wonderful that the linguistic, cultural, and ethnic diversity of the city exposes kids to all sorts of experiences that kids living in monolithic suburbs will never encounter. It seems to make them grow up as more worldly and tolerant adults.

  36. Kris says:

    One thing to keep in mind regarding the idea to shift your work schedules to minimize daycare. All the daycare centers we contacted only accepted infants full-time. My husband worked four days a week, but we weren’t able to save any money by having him watch the baby on that day. You had to pay regardless of whether your child was there.

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