Having A Baby - Transcript

By Motley Fool Wealth Management

Alison Southwick: This is Motley Fool Answers. I'm Alison Southwick, and I'm joined, as always, by Robert Brokamp, personal finance expert here at The Motley Fool.

Robert Brokamp: Hello, everyone!

Southwick: This week is our second in the series, right?

Brokamp: I think so, yes.

Southwick: Ah! And when we're tackling major life events like a financial pro -- and this week we're doing it with the help of Dan Messeca -- we're going to cover the financial decisions and steps you need to take when a baby comes into your life. Aw! Kids! All that and more on this week's episode of Motley Fool Answers.

Southwick: So, Bro, what's up?

Brokamp: Well, Alison, likely these days you've probably seen all kinds of stories about how we've reached the 10-year anniversary of the start of the current bull market, which means basically the end of the market dive that happened during the Great Recession. The market bottomed at the beginning of March of 2009. It reached 10 years. It's been a fabulous time to be a stock investor. The S&P 500 averaged around 17% a year. Fantastic!

Unfortunately, it's not going to...

Southwick: Here comes the "awfulizer"! Here he is!

Brokamp: No, it's not! This isn't awful. I'm just saying unfortunately over the last decade...

Southwick: OK! OK!

Brokamp: ... it hasn't been such a great time to be a "cash" investor because they drastically lowered interest rates as a remedy to the Great Recession. Back in March of 2009, looking at the one-month Treasury (which is kind of a proxy for cash), it was paying 0.1%. Now starting in 2015 the Fed started raising interest rates. There were four hikes last year, so as of now you can get 2.5% on a one-month Treasury. I bring this up for two reasons. No. 1, the Fed is likely to pause at this point. Even toward the end of last year, the Fed was suggesting that there were going to be two hikes this year.

A lot of that has changed. A couple of weeks ago, Chairman Jerome Powell (chairman of the Fed) told Congress that at this point they're going to take a wait-and-see approach to rates, partially because of what happened in the stock market toward of the end of last year, but also because growth around the globe is slowing, particularly in Europe and China.

In addition, inflation has been really low. When you talk about inflation, most people think of the Consumer Price Index. What the Fed pays attention to is something else. It's called the Personal Consumption Expenditures Index. They look at the core (which takes out food and energy). The most recent reading is 1.9% -- down from about 2.5% as of somewhere in the middle of last year -- so inflation is actually going down.

At this point, if you look at what the market is predicting about interest rates from the Fed, there's a greater chance that rates are going to get cut again this year than they're going to be raised. Most people expect that they're going to stay the same.

What does that mean?

That means right now you actually can get some decent rates from things like Treasuries (short-term Treasuries, one-year CDs, two-year CDs, three-year CDs). People have been putting off locking their money up that way because they figure rates are going to keep going up. Now might be a time to consider grabbing some of those rates while they're still at this level.

That brings me to my second point, and that is most people are not doing it. The vast majority of cash in this country is still sitting in checking accounts, savings accounts, sweep accounts -- and I'll describe what those are in a second -- that are paying 0.1%, 0.2%, 0.3% when you could be earning much more. In fact, banks and brokerages are making millions off of people who are sitting there in low-yield and cash. Jason Zweig at The Wall Street Journal has covered this a couple of times over the past year.

In August, Jason wrote this article where he pointed out something brokerages have been doing. Let's say you sell a stock and you have that cash in your account. Often they'll put that in money market funds, which these days are yielding 2.0-2.5%. What a lot of them have been doing is taking the money out of those funds and putting them in a "sweep account," which is more like a bank account, but they don't often hold it. Instead, they farm it out to another bank. The bank pays the brokerage 1.5-2% but you're only getting that 0.1-0.3%. They're pocketing the difference. This is how some of these online brokerages or app-based brokerages that offer free trades make money. It's because that cash sits in your account earning nothing, but they're able to earn a little bit of money on it.

The bottom line, here, is don't let them do it. There are many ways to earn 2.0-2.5% on your cash. A couple of places to look. Of course, The Ascent, which is a Motley Fool company where you can get various ideas for where you can get good yields on savings accounts, checking accounts, money market accounts. Also reviews on credit cards and mortgages.

Another place to look is your local credit union. There are actually many credit unions that will pay you up to 5% on your checking up to a certain amount, like up to your first $2,000 or $2,500, so you want to look at what's in your area. And for your brokerage account, probably the best bet is a money market fund, which is different than a money market account. A money market account is offered by a bank. FDIC insured. Very safe.

A money market fund is a mutual fund of short-term Treasuries and short-term debt. Still historically very safe but not guaranteed, so you're taking a little bit more risk. But if you go to cranedata.com, every day they will list the top five yielding money market funds for taxable accounts and the top five tax-free and top five for institutions.

These days the best rates are coming from Vanguard, Fidelity, and those folks, and you can get 2.5%. Not a whole lot of money, but it's still better than nothing and if you have a lot of cash sitting around in your emergency fund, why not make that extra $100, $200, or $300?

----------

Southwick: Woo! Baby-making. It is expensive. Bro, how much does it cost to raise a kid?

Brokamp: Well, fortunately the government agency that calculates that, which is the U.S. Department of Agriculture, provides a very helpful calculator where you enter in some information about your income, whether you're married or not, how many kids you have, where you live; all that will estimate for you how much it costs to raise a kid. But on average, to raise a kid up until age 18 -- so not even including college -- costs between $250,000 and $300,000.

Southwick: All right, I have put my data into the calculator here...

Brokamp: You have the one kid...

Southwick: One kid. Age of first child -- she's five. All right. Calculate. Please calculate...

Rick Engdahl: It's weird, because it seems like having a kid is free. They rope you in on that, don't they?

Daniel Messeca: My grandmother kept telling me, day after day, that having a child is free to cheap. I think she had an endgame in sight...

Southwick: Yes, she did. All right, so my child is going to cost me $27,000 a year. That's a lot of money!

Brokamp: It is a lot of money. That's a lot of lifestyle.

Southwick: Just one, huh? Just one. Oy! Well, joining us, today, to help us tackle how you can deal with that bill for owning your kid in the most fiscally responsible way as possible, is Dan Messeca. He's a financial planner with Motley Fool Wealth Management. Dan, thank you for joining us today!

Messeca: You're welcome!

Engdahl: A sister company of The Motley Fool.

Southwick: Thank you, Rick! Dan, you have been on the show before to help us with some mailbag episodes, but this week you are back to help us tackle all the financial decisions and things you need to think about when you have a baby.

Messeca: Yeah, that's right. Everything.

Southwick: And you are doing this not only from the perspective of someone who has helped in the process of having a baby, but also as a financial planner.

Messeca: Right! That was an interesting way to frame it. "Helped in the process of having a baby."

Brokamp: [Laughs] In other words, he's a new dad. That's what we're trying to say here.

Southwick: You're a new dad, and I think it's fair to say that your wife did most of the heavy lifting when it came time to actually have the baby.

Messeca: Yes.

Southwick: Yes.

Messeca: Very true.

Southwick: That's why I just want to give ladies their due, because...

Brokamp: Eight months old, right?

Messeca: Yeah, eight months.

Brokamp: Congratulations!

Messeca: Thank you very much!

Southwick: Yup, congrats! And so yes, you are a new father, so you are going through a lot of this personally. And, as a financial planner, you've also helped a lot of people navigate having a baby and beyond; I mean, because, boy...

Brokamp: It's just the beginning, buddy! [Laughs]

Southwick: Oh, ho ha ha! Cool! So let's get into it! First we're going to talk about what the fun side effects are of having a kid, and that is that your own life suddenly goes up in value. You're suddenly a more important person because you had a baby.

Messeca: To someone.

Southwick: To someone, yeah.

Brokamp: Not to everyone. Just to someone.

Southwick: No, just to someone. So let's talk about how you need to value your life a little bit more.

Messeca: I think the first thing that we did -- which is easier from the perspective of a financial planner because we do it every day -- was to talk a little bit about our own deaths.

Southwick: So fun!

Brokamp: Yes, the arrival of a new life makes you think about your own death.

Messeca: Right, it's something to measure how close that's coming by. The first thing we did was talk about what happens when we're not around anymore. And to do that, you really start looking at estate planning, life insurance, and generally talking about what would happen if we were to be gone. From a formality perspective, finding an attorney who can work with you to draft up some estate plans. Wills if you don't have them. Updating beneficiaries on accounts.

Southwick: For what accounts?

Messeca: On IRAs. If you have life insurance already, you want to look at that. If you don't have it, you'll want to apply for it, because that can take some time. Making sure you get the right amount in place.

But from a different perspective, I think one thing I did not think a whole lot about -- in the process of updating wills and getting trusts in place -- was who's going to be the guardian to your children. The guardian and the person who makes the financial decisions can be separate people.

That was sprung on us in the middle of a conversation, and I think fortunately we had people in mind to fill all those roles. That's something probably worth talking about before you march into an attorney's office and start putting things to paper.

Brokamp: The people who may be good surrogate parents to your kids may not be the best at handling money. Those are two separate skill sets.

Southwick: So what are different ways that you structure that, because if someone is looking after the kids, then they obviously need money to take care of the kids. How does that relationship work?

Messeca: You want people who can work well together, because they will have a relationship in managing those decisions. But the way it was framed to us -- and I think it makes a lot of sense -- is just to have an outside perspective to make sure that those funds are being put to the right use and the use that you would want it to be, rather than just having someone who might not be so good with money, themselves, or might not be able to prioritize in the same way that you want.

We had a couple of our cousins who filled those roles for us. We felt like they would be nice counterbalances to each other. But that never would have crossed my mind, honestly.

Southwick: So you do have it set up so that one cousin is managing the money and one cousin is taking care of the kid?

Messeca: Mm-hmm.

Southwick: Oh, really?

Messeca: Yes.

Southwick: And they're cool with that.

Messeca: Yes. They signed up for it. Hopefully it doesn't come to that.

Southwick: Hopefully it never comes to that, of course. So update your will and estate plan. Thinking about the guardians, but also who's going to handle the money. Let's talk a little bit more about purchasing life insurance, because for us, personally, it got weird. I didn't like the guy that we went to go talk to about it. He wanted us to purchase a ton of life insurance that I didn't feel is necessary, but maybe why not go err on the side of tons of money?

Messeca: The question of who you see is a good one, because that can take a lot of different forms. A life insurance salesman is going to make money when you buy life insurance, and his pay is going to depend on how much you buy. But I think when you are seeking out a policy, you know that already. They've got to make money and you need a service, so it's a good fit.

As far as what type and how much, the way to frame it is if something were to happen to you, what would be lost and what would need to be replaced? If I were gone, my wife would still need to raise the children. Pay for all the things that are happening. Her ability to work may be impacted, so if she's going to have to stay home longer, how do we replace that income? Or if she won't be able to stay home, how can she afford the additional care that's needed?

There's a lot of formulas that are in place that might help you get there, but I actually think it's more of a personal review than just fitting into some formula.

Brokamp: Do you generally go with the "buy term life insurance" school?

Messeca: Yes. If we're looking at covering the need of a child, then I do go by that method. You want to make sure you have enough money to get your kid to maybe not total self-dependence, but close to it. Getting them out of school. Out of college, perhaps. Twenty years is a good time frame. Or if you're a great saver, maybe you can do less.

Brokamp: We did 20 years once our kids were born.

Southwick: Twenty years of what, though?

Brokamp: Of term life insurance.

Southwick: So it would pay out for 20 years? See, I don't know the basics of life insurance. Help me!

Brokamp: That's a great question, Alison!

Messeca: That is a good question!

Brokamp: You pay the same premium every year for 20 years, and you maintain that same coverage unless you change anything.

Southwick: So you will be paying for that for the next 20 years. Then by the time you are 60 or 70, then you stop paying life insurance because at that point you're not making any money anyway, so it's not like you're replacing any lost income. Is that the thinking?

Brokamp: Right. My thinking was along the lines of what Dan said, and that is basically around the time they're in college, if something happens to me after that, they're going to probably be OK. I just want to make sure my wife has money if something happens to me before then.

Southwick: But do you get to that number based on your income? Or do you get to that number based on your expenses?

Brokamp: That's a good question...

Southwick: I'm full of good questions!

Brokamp: You're just full of it. So I'll just give my answer.

Messeca: Sure.

Brokamp: There are lots of tools on the internet that will allow you to do that. I'm sure Dan uses some financial planning software that is more sophisticated that could help you arrive at that. There's also a classic rule of thumb of 10 times your salary, which I think is actually a pretty good starting point. Am I about right on that?

Messeca: Yes, 10 times salary is the easiest one, and I'm all for the path of least resistance when it goes to making financial decisions. If you didn't want to go calculate everything item by item, if you're at 10 times salary, you're probably in a good spot. It gives you 10 years of buffer to figure out what you have to do after that if everything else goes to...

I heard Sean cursed on this show. Is that on the table?

Southwick: Did we beep it?

Messeca: You did. It was my favorite moment on the podcast.

Southwick: I don't know that Sean made a lot of friends with our episode when he was on. He came strong to the hoop.

Messeca: He made one friend, because I liked hearing about the edit.

Brokamp: There are a couple of other important things to know about life insurance. First of all, it's tax-free, so that's good to know you're getting all that money. And also the survivors will still get some Social Security, as well. So if you were to pass away, your survivors won't have to rely just on life insurance.

But the term "insurance," especially for a new parent -- let's assume you're around 30 years old -- if you're healthy, you want a $500,000 policy. It's only going to cost you $200-300 a year. And I would say $500,000 is probably not enough for most people. You shouldn't really skimp on it. To move that up to $1 million would cost you less than $200 a year. You might as well. It's good investment, because the difference between having a life insurance policy of $500,000 vs. $1 million when someone dies could make a world of difference.

Messeca: Absolutely!

Southwick: And the last one was updating your beneficiaries. As we've talked about on the show before, what you have in your will still gets trumped by who you have as your beneficiaries on different accounts.

Brokamp: The laws vary from state to state, but at the very least it causes problems if your life insurance policy, 401(k), or IRA says it's going to this person but your will says no, it goes to this person.

Southwick: Let's move on and talk more about work stuff that you've got to deal with.

Messeca: I think to start off -- to transition from life insurance into work benefits -- most people do get some life insurance through work, so it's good to check and see what you may already have in place before you go off shopping. Then you can often choose to buy insurance through your work plan in lieu of going out and finding an insurance salesman and buying it on your own.

Southwick: That's what we ended up doing -- doing it through The Fool.

Brokamp: And depending on the situation, it may be more expensive or may not, but what is really appealing is if you have health issues and you're going out on your own, to get a policy could be very expensive. It might be easier or less expensive if you do it as part of a group plan.

Messeca: And I found the reverse scenario to be true, where if you're healthy and young, it's usually cheaper to go off on your own and separate yourself from a big group to benefit from your own age and health. That's No. 1.

The other thing is health insurance. Don't forget to add your newborn to your plan, because they cost a lot of money.

Brokamp: Because you're going to need it, buddy.

Messeca: Yeah. Actually, in the first month after the baby was born, I got a bill from our insurance provider for like $19,000. I thought I screwed that up. I was like, "Oh, man, did I forget to do something that our HR person told me to do months and months ago?"

It turns out that wasn't the case. There's like a coordination of benefits thing that they call for every year to make sure I don't have other insurance. They still pay out and I guess they never got me and were like, "OK, let's just bill him for the whole thing and see if he pays."

Brokamp: It could still happen. Maybe we'll get a check.

Messeca: So you want to log into your account or call your service provider and just make sure that you add your dependent as soon as you can so that they're covered for all their hospital visits, too.

Southwick: We had this nightmare scenario that was suggested to us during the baby classes. You've got to go to the hospital and you learn to breathe through the pain and whatever. So the woman had opened it up to the class for questions. Someone raised their hand. He didn't have a question, but he wanted to point out that when you go to the hospital to have a baby, the hospital may be within your network, but the anesthesiologist, for example, may not. So you may get your hospital bill taken care of, but you're going to get drilled by the anesthesiologist for tens of thousands of dollars if they're not in your network or in your coverage.

That's just a terrifying little tidbit that I like to share with people to think about. Unfortunately there's not a whole lot you can do. It's not like you can necessarily schedule your birth -- maybe if it's a C section -- but you get stuck with whatever anesthesiologist is on call. But just something to think about is that there's a number of fun ways where you can get a big bill.

Messeca: Yes, honey, we're doing home-delivery natural birth.

Southwick: Because I am in coverage, my bills are very cheap.

Brokamp: The house is in network.

Southwick: We covered health insurance. How about flexible spending?

Messeca: One thing you may want to plan ahead for -- and as years go on and you have more experience with your child you'll know exactly how to use this to the best of its ability -- is you can actually defer dollars into a flexible spending plan for dependent care. The benefit of that is you get to defer dollars pre-tax, so your dollar goes a longer way. And whenever you have an eligible expense for child care, you can reimburse yourself through that plan. And I believe you can do up to $5,000 every year. The only thing is it's use it or lose it, but it's a way to make your dollar go a little bit further as you pay for child care.

Brokamp: Of course, there's healthcare flexible spending, as well, and your healthcare bills will likely go up. And the other thing is that in many of these types of programs through your employer, you can only sign up at one time during the year, during the enrollment period; however, in most situations if there's a major life event that allows you to redo that, having a kid usually qualifies, so you can change how much you contribute to these plans.

Messeca: Right.

Southwick: What about disability insurance?

Messeca: A child is a good opportunity to make sure that you're covered if you were to become disabled. Suppose you have a spouse or a significant other with you. You might be able to cover all your needs on one income during that period; but, if you're taking care of a baby your expenses are going up, so you want to make sure you know how much you'll have covered if something were to happen to you to make sure that's enough buffer for you to meet all your other expenses, whether it be child care, food costs, clothing, etc. that will come your way.

Brokamp: Disability's a tough one. First of all, most people get some through their employer...

Messeca: Right.

Brokamp: ...if you work for a larger employer. That's good, although it doesn't last forever, generally speaking. Buying it on your own is really tough. It's really expensive because the odds are much higher that before age 65, you'll become disabled and then you'll die, which is why life insurance is relatively cheap and disability insurance is not.

Messeca: Right. In my history, anytime I've seen someone shopping for it individually, they've decided maybe I'll take the risk. But it's actually a risk you want to make sure is covered. Thankfully, most employers do cover it to some extent. Just verify to what extent that is.

Then an interesting wrinkle there is also it can be taxable or nontaxable, depending on how it's paid for. If you're paying out of pocket, usually your benefits are after tax, but if it's being paid for you by an employer and therefore not taxed, it's taxed to you as income when you receive it.

Brokamp: Right. And anyone who's working has some disability insurance through the Social Security system. The thing is it's pretty hard to qualify for that. If you're worried about a broader range of possible disabilities, it's better to have your own policy.

Southwick: Let's move on. The baby's home. Now what?

Messeca: Yeah. For us, my wife stayed home for a long time after the baby was born. One of the biggest things that we were worried about was having a big-enough emergency reserve, because the scope of unknowns becomes infinitely larger. We don't know what we need to buy to take care of the baby. If something happened and I needed to stay home longer, how would we cover these expenses? So revisiting your emergency reserve, which hopefully you already have in place, is step No. 1. And maybe contributing more than you would just to build an extra buffer in place of what you had before would be my first recommendation.

The way that it can impact you on a daily basis, from a tax perspective, is there are certain tax credits that come with having a baby, which could help you, and that can be a nice opportunity to revisit your withholdings and get more of your dollars flowing through to you throughout the year instead of living on less and then waiting for a refund at the end.

There's a child tax credit which is now $2,000 per child which can help you out. There are also some other things like a child care tax credit where if you're not using that flexible spending account, you might have an opportunity to get money back in your taxes, as well. But revisit your taxes. Check your withholdings. I'd rather have my dollar today than tomorrow.

Brokamp: And it's especially true, too, if one parent decides to stop working and stay at home. Then your tax situation changes considerably, and it's another reason to revisit that.

Messeca: Right, absolutely.

Southwick: Let's move on to some mistakes that you've perhaps seen people make in your career as a financial planner.

Messeca: The biggest mistake I've seen time and time again, working mostly with people approaching retirement, is folks who've saved very aggressively for their children, in particular as it relates to college funding, but skipped out on their own retirement savings in place of that.

The most recent example I can think of is someone who had, I think, four children each with six-figure savings accounts that were in their name personally or in a 529 plan. And that person's retirement plan was less than some of the value of their kids' plans.

And they were hoping for an early retirement. That's just not in the cards for them anymore, because they've lost all that compound growth that they could have had over the years by giving something to their children, which is noble, great, and set them up really well; but that just means that they'll be working longer than they wanted to as a result of that.

Southwick: What are some ways that you can prevent that? Obviously paying yourself first, to some extent. Putting money in a 529 plan? Keeping the money in your own name rather than putting it in your kids' accounts? Are there different ways that you can hedge a little bit and have flexibility in the savings?

Messeca: First is making sure that you're maxing out your retirement plan. If you're doing that and then giving something to your children, you're probably on the right track already.

Identifying what exactly your goal is for them. If it's to cover college costs entirely, at least you might have a target for what that's like, instead of just blindly throwing money into an account. Or maybe you don't want to cover everything and you can do it in a different way and contribute less.

The last thing I'll say is if it really is "I want to make an impactful legacy gift to them that would take care of them forever," maybe you can look at something like life insurance on a permanent level, which could leverage your dollars more than just giving money in their name today.

There are lots of different things you can do, but I think take care of yourself first is the biggest tip, because once it's in their name, you lose control of all of that.

Brokamp: It's definitely important to start saving for your own retirement first, and that doesn't mean you can't then help out with college later. So first of all, the money in IRAs can be used for higher education purposes. You might pay taxes, but there are ways to avoid some of the penalties. If you save for your retirement up until college -- if you've done a good job of that -- then while they're in college you can back off from the retirement savings and instead of that money going into the 401(k), it goes to tuition or something like that.

But you have much more flexibility if you focus first on retirement. Then when you get to college you have something there already saved up. 529s are good. We have them. I think most of the people in this room have them.

Southwick: We have them.

Brokamp: And I don't think it's a bad idea to open one up as soon as the kid is born and just put $100 every month, automatically, to start building that up to have something there. But if you're not saving for your retirement at all, then I would avoid doing that, at least as your first step.

Southwick: What's another mistake that you've seen people make?

Messeca: The next mistake would be not planning ahead. Some of the things I described early are very long and boring processes, like getting your estate plans redone. Applying for life insurance. Life insurance can take weeks to get approved for. An estate plan took months to do. And if you wait until after the baby comes, I would probably not want to deal with it because you have so much else going on...

Southwick: There's so much crying.

Messeca: There's a lot of crying.

Southwick: So much crying and laundry.

Brokamp: And that's just from the parent.

Southwick: Oh, the laundry!

Brokamp: But at least you get a lot of sleep.

Messeca: What I've most often seen is folks who are the parents of 10-year-olds or 15-year-olds saying, "OK, we should probably do an estate plan." Well, they should have done it 15 years earlier, but the fact is you have so much going on that you don't want to deal with it or think about it because if it's not taking care of a newborn, it's adjusting back to work life and then dealing with all these new expenses. That four-figure attorney bill isn't the most welcome thing. The more you can get ahead of that, the better it is.

Brokamp: And for people listening who don't have kids but maybe they have relatives who do have kids or are about to have kids, and you're looking for a way to help them and help them financially, helping them identify a good financial planner or a good estate planning attorney -- and maybe even paying for it -- would be a big step forward, because when you think of a young family, they don't have time, they may not have money, and again, to be looking at big bill for a financial planner or an attorney just may not seem like the best way to spend money from their perspective. But if you have the resources as grandparent or a parent to these kids, it might be a big help to do that for them.

Messeca: Just a recommendation to someone would be a big help, because as a new parent, you probably haven't worked with a lawyer very often, hopefully. Just trying to find out where to start is a pain in the neck.

Southwick: And the last mistake you want to call out on today's show.

Messeca: Don't overspend on your baby.

Southwick: Whaaat?!

Messeca: They will outgrow everything real fast. You'll get one photo in the new dress and then it's going to be gone forever. Avoid that trap of thinking she's going to look cute in this so I need to buy all of these things for her. You'll want that money in your emergency reserve for all the other things that will come down the pike.

Southwick: What are some things that you guys have done to not overspend on your baby?

Messeca: I think we've done a pretty good job of spending very little on things for her, because people like to give you things when you have a baby.

Southwick: Especially here at The Fool. They love to hand down clothes.

Messeca: Yes, we got a nice care package, too, from The Fool, in the mail, which was nice. But even family members will buy you things or give you hand-me-downs, so I think we've done a pretty good job of benefiting from the people around us who just want the things out of their house. We got a secondhand crib, a changing table, all these different things. As long as you're OK with that, I think that's a great way to go.

Southwick: We had a lot of luck with going to consignment sales for kids' clothes, toys, and furniture. We tried, as little as possible, to buy new things for Hanna, and it was fine. We got tons of kids' stuff on Craigslist.

Brokamp: Freecycle...

Southwick: Freecycle.

Brokamp: ...if that's active in your area.

Messeca: I feel like there are a lot of Facebook community groups for new parents, and everyone's happy to share. That's probably a good place to look.

Engdahl: New stuff is for grandparents.

Southwick: Right!

Messeca: That's right.

Southwick: Grandparents -- that's their job. How about some resources for people to go read more about being financially responsible with baby?

Messeca: One good one -- not necessarily to read more, but to help improve your finances -- is Upromise. It's a program that helps give you money back toward mostly college expenses for every dollar that you spend. They can link those up with 529 plans, for example, and some of the vendors from who you're already buying stuff will give you a certain percentage of cash back toward an objective like college financing or repaying student loans.

Southwick: And that's the letter "U" and then the word "promise."

Messeca: Correct.

Southwick: Not "y-o-u."

Messeca: Have you had any experience with Upromise?

Brokamp: I've used my Upromise card.

Messeca: That's good. I've actually seen the Upromise card out in the world more often, which means that people are thinking about that.

The other one, because you are starting to look at how much you're spending, is just a budget tracker like Mint.com. If you haven't used that before, I use it more retrospectively to see what I've done and see where my dollars are going, but just to make sure that your spending is in line with what you thought it would be, which might influence what your emergency reserve should be as well.

And the last one would be a fee-based planner. We referenced earlier that it's good to work with a financial planner to see what your life insurance needs might be. What your budget should be like. It's sometimes hard to do that on your own either because you don't have the tools or patience. Maybe it's hard to communicate with your spouse about those things. So having a professional third party who can help put that into perspective for you and look at today vs. down the road toward retirement I think is something that's very valuable to almost everyone.

Southwick: Are there any specific financial concerns that you need to have if you're adopting a kid?

Brokamp: It's expensive. I'm just telling you from personal experience. Our daughter, now, is 14, so I can't remember exactly how much, but I think it cost $30,000, but you do get a tax credit -- at least you did back then -- to offset some of it.

Southwick: Really!?

Brokamp: Yes, but it's like a financial goal that you save up for.

Southwick: Wow! All right, Dan, you're going to stick around because speaking of overspending on baby, I'm going to see if you guys can guess some prices for some of the most extravagant baby things out there. Do you want to stick around for that?

Messeca: Yes, I guess so.

Southwick: All right, thank you! And then also I want to say to our listeners that our sister company, Motley Fool Wealth Management, is a registered investment advisor that can help put your financial plan and investing needs in the context of your big life transition.

If you've enjoyed learning from Dan or the other Motley Fool Wealth Management planners we've had on the show, guess what? You can get even more of them in your life. Visit foolwealth.com/radio you can find podcasts, notes, and resources and even book a no-obligation appointment with Dan Messeca or another planner you've probably heard on the show.

Please consider the risks and costs and suitability of investments before choosing any investment professional. All investments involve risk and may lose money. Motley Fool Wealth Management does not guarantee the results of any its advice or account management.

Got to love a good disclosure. Disclaimer disclosure.

----------

Southwick: Last week we went shopping for a giga-mansion, and today we're going shopping for a baby. I want to see how well you guys can guess some of the most extravagant things that you can buy for a little munchkin.

Brokamp: All right.

Southwick: Close this without going over. Shall we do it that way?

Brokamp: OK.

Southwick: Rick, are you in?

Engdahl: I'm in!

Southwick: All right. Rick usually does pretty well with this. Let's start with Snuffles the Teddy Bear. His eyes are made of Tahitian black pearls and his coat is made of white alpaca. Snuffles also wears a 10-carat diamond necklace with a white-gold chain. A one-of-a-kind teddy bear, he was the showstopper at the GUND booth at the International Toy Fair in New York back in 2010. While you can get a low-rent Snuffles on Amazon for around $20, this luxury Snuffles was priced at?

Brokamp: Oh, man! I don't know.

Messeca: I don't even know what universe to start in. Rick, do you have a kickoff number?

Engdahl: $10,000.

Brokamp: I'll say $7,500.

Messeca: I'm going to go $14,999.

Southwick: Rick nailed it!

Brokamp: What?

Messeca: Really?

Southwick: $10,000. Rick is good at this.

Brokamp: Is he googling over there?

Southwick: You can't actually buy it, though, because it was created to be auctioned for charity.

Brokamp: Oh, priceless!

Southwick: I will offer my recommendation from my personal experience as a mother. Instead of getting a Snuffles, I would recommend buying Hanna's favorite stuffed animal when she was little, and that would be medium-size Jellycat Bashful Bunny, which is like $20. It's a great stuffed animal.

Brokamp: Much cheaper than $10,000.

Southwick: Much cheaper!

Engdahl: I'll also throw in the IKEA bin of stuffed animals. Always very popular.

Brokamp: My kids loved it. Loved it!

Southwick: "Travel in style with the Balmoral Pram by Silver Cross, described as the definitive luxury pram." It is the most British-looking thing in the world. Here's a description: "Exuding British engineering at its best, the iconic design is the embodiment of quality and craftsmanship. From the polished-chrome chassis to the hand-stitched fabrics and the hallmark, hand-painted fine-line detail." You guys know what a pram is, right? All right. Who wants to go first?

Brokamp: Well, I'm going to go with $5,000. I didn't hear any diamonds...

Southwick: Any gold or diamonds.

Messeca: I'm going to go with $8,000.

Engdahl: $8,001.

Southwick: It's actually $2,700. So that's pretty nice. But wait -- there's more! Because your kid will outgrow the pram immediately, you can buy them their own pram for their dolls at the low, low cost of $500.

Brokamp: Oh, my goodness!

Messeca: That's a steal.

Southwick: That's a steal. Personally, I would recommend for a stroller the City Mini GT. Because we walk everywhere, every day, we logged probably close to 4,000 miles over the course of five years on that stroller. It's crazy. I mean, we walked several miles a day, so that's good. The City Mini GT.

Messeca: I think that's what we have, actually.

Southwick: It's a good stroller. It's a great stroller!

Engdahl: For the newborns? Don't even bother with a stroller. Just get the little strap things or the backpacks.

Messeca: I couldn't figure that out. I struggled.

Engdahl: All I can say is they're a lot easier to get in and out of places and stuff. It's just too hard to have a stroller everywhere.

Southwick: Yes, we had a MOBY Wrap, too. When she was really little, I just strapped her to me like a little kangaroo.

Engdahl: And you know that your kids are going to live in the car seat for pretty much the first three years of their life, anyway. All you need is the car seat. You just carry it around. You put it down in the little stool in the restaurant. Then you pick it up.

Southwick: There's nothing worse than carrying a car seat.

Engdahl: No, you get the one that straps into the stroller. They just never leave. They're always strapped in.

Southwick: I hated carrying a car seat around. Ugh! Have fun searching for this on the floor at two in the morning. It's the world's most expensive pacifier. It was originally gifted to Brad Pitt and Angelina Jolie as an obvious PR stunt by the company Ulubulu. It's more than three carats of diamonds and 18-carat gold, and for this price they'll even engrave it for you. There you go. Diamond-encrusted 18-carat gold pacifier. How much would you pay?

Brokamp: I would pay absolutely nothing, but as for how much it's worth, I don't know. I'm so clueless about stuff like this.

Messeca: $18,000.

Brokamp: I'm going to go with $12,000.

Engdahl: I'll go with $1 just for fun.

Southwick: Bro got it for not going over, but you were closest. It's $17,000.

Brokamp: Oh! Impressive!

Southwick: Our pacifier of choice was the MAM Glow in the Dark pacifiers because they glowed in the dark! If your kids end up using a pacifier, you're going to spend so much of your time looking for pacifiers on the ground. Anyway, that's the one we used.

Brokamp: Only one of our kids was really into pacifiers. Lucas went through this period where when he needed to be sleeping, he was in a room with a hardwood floor, and we'd hear in the middle of the night that "clank" of the pacifier on...

Southwick: And your heart just...

Brokamp: Exactly. You feel like, "I've got to get up! Oh, my God!"

Southwick: We had the same thing.

Brokamp: Like oh, ho, ho!

Southwick: Oh, it just hurts. It just hurts! Baby's got to have somewhere to sleep, so let's head over to the shop Suommo, a luxury baby website for the children of Saudi princes and Kardashians. We're going to go shopping for La Perla, which is their crib, the gold edition, of course. It is described as... This is some amazing copy, here.

"The most exclusive dream in the world plated with 18-carat gold. Close your eyes. There it is. Astonishing, magnificent, admirable, as only the finest works of art can be. The golden glow provided by the most magnificent 18-carat yellow gold plated shines from every single angle. It is impossible to hide such beauty, for this jewel is made of the very material dreams are made of."

It's so hard to describe visually, but it's gold. It's gold! I mean, I think you got that.

Messeca: Plated!

Southwick: And it's got these exaggerated bulbous parts. There's something very Alice in Wonderland about it -- like if Tweedledum and Tweedledee were trust fund babies. So if you can imagine that... There you go! There you can see it.

Engdahl: It looks like an Egyptian sarcophagus.

Southwick: Yeah, it's...

Brokamp: Something classical about it.

Southwick: It's something. It's something. So, there you go. How much are you going to pay for it, though?

Brokamp: I'm going to go with $25,000.

Southwick: It is made of the very material that dreams are made of.

Brokamp: Oh, that's right. $25,001.

Engdahl: $125,000.

Messeca: Ooh, I'm going to go $50,000.

Southwick: €60,000. I'm going to go with you. I don't know what the euro to U.S. dollar is right now.

Brokamp: You, meaning Dan.

Southwick: Yes, I'm going to go with Dan. You can also get a matching dresser for €68,000. So there you go. Meanwhile, at the Southwick home, we went with the $80 IKEA SNIGLAR, which is just a great crib. And $80.

Brokamp: It only took you a week to put it together.

Southwick: Oh, I love putting IKEA furniture together! Oh, yeah. If I could retire and my job would be just helping put IKEA furniture together, I would totally do that as a job.

Brokamp: You can do that.

Southwick: I would love to...

Brokamp: Just get a job at IKEA.

Southwick: It's like LEGOS for adults. All right, that's it. That's all I've got, so there you go. If you want to spend a lot of money on your baby, that's how you do it. A gold-plated I don't know. Everything. I'd go buy everything.

Brokamp: Baby sarcophagus.

Southwick: A gold-plated sarcophagus. All right, Dan, thank you so much for joining us!

Messeca: You're welcome! Thanks for having me!

Southwick: It's been our pleasure. Well, that's the show. It's edited 18-carat-gold-platingly by Rick Engdahl. Our email is Answers@Fool.com. You can also follow us on Twitter. We're @AnswersPodcast and all three of us are on Twitter somewhere.

Engdahl: Sell it, Alison, sell it!

Southwick: I don't know. You guys don't really do much on Twitter.

Brokamp: I really don't.

Southwick: So...I mean...

Engdahl: Follow people.

Southwick: I post stuff maybe...

Engdahl: I'm a Twitter stalker.

Brokamp: It's a good way to get ahold of us.

Southwick: It is. If you do get ahold of us on Twitter, we are likely to pay attention.

Engdahl: I might do more on Twitter if people tweeted at me.

Southwick: There you go.

Brokamp: What's your Twitto, Twittle eName? What do they call it? What's your Twattle?

Engdahl: Never mind. Tweet at Bro.

Southwick: [laughs] All right, whatever. Tweet us or don't. You can also join the Motley Fool Podcast group on Facebook. Just knock and you'll be let in. And I don't know. Where else can they find us?

Brokamp: They could email us at Answers@Fool.com.

Southwick: We're outside your house right now. Yes, Answers@Fool.com. If you have any questions, we always have a mailbag episode right around the corner. All right. For Robert Brokamp, I'm Alison Southwick. Stay Foolish, everybody!