Planner stresses need to prepare for unexpected

Starting a family is a good time to start financial planning.

Cheryl Curran, a certified financial planner at Merriman Berkman Next who is working with Ben and Jill Tsu, of Bothell, said the arrival of children brings special priorities.

Of course, there's college savings.

"The earlier they start, the better," she said, and college funds can be sheltered from taxes.

Yet another consideration is whether the parents expect the children to attend public or private schools.

If the latter, they'll need to build a nest egg sooner.

Tell relatives about the savings, she said. They may want to make a contribution to the children's college fund instead of buying another toy.

Curran emphasizes planning for the unexpected.

She recommends that parents complete wills that state who will take custody of the children in the event of their deaths, and who will handle the assets the children inherit. It might not be the same person.

"Someone who is a good nurturer might not be the one who is best with finances," the Seattle financial planner said.

"But it's so important to sit down and get this down legally. The last thing children need when they're mourning is a family fighting over" their assets and custody.

Trusts are one solution. Curran said another avenue for handling children's money is an inherited IRA, "which can turn into a fantastic retirement account for a kid. They can spread it out over 60 years, or the can take the distribution and put it in their own retirement account."

Curran suggests life insurance as another safety net, particularly term life.

A full-time wage earner should be insured for three to five years of earnings.

But even a stay-at-home parent should carry some life insurance, she said, perhaps half that of the wage earner.

The couple should look over their 401(k)s, IRAs, Roth IRAs, other accounts and after-tax investments to make sure they have a good balance and are not taking too much risk, or too little.

"They also need to make sure they have some after-tax money in an emergency account," Curran said. "They don't want to be faced with an emergency and have to tap in to their retirement accounts to cover it." It should be equal to about six months worth of living expenses.

Curran will urge the Tsus to continue their own retirement savings.

"Their money has some more places to go now," she said.