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Before the stork arrives
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June 9, 2000: 6:03 a.m. ET
How to get your long-term financial house in order when you're expecting
By Staff Writer Jennifer Karchmer
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NEW YORK (CNNfn) - You've moved the new crib into the bedroom and decorated the walls with teddy bears and rainbows. Now it's on to stocking the house with diapers and baby formula.
But while you're expecting, advisers say this is actually the perfect time to get your financial house in order too -- before you're exhausted from 3 a.m. feedings and rocking the bundle of joy to sleep.
Whether it's writing a will, starting a college fund or maximizing your 401(k) savings, these steps will help insure that you and your child are in good hands as you start building your new family.
"Usually when you're expecting you're saying 'I'm eating for two,' but now the baby's born, you're thinking for three (people)," said Ann Hoeppner, a certified financial planner (CFP) in Del Mar, Calif. "So you want to take a look in your financial life and see what would happen if both of you passed away. Who would take care of your child?"
Writing a will
It's an unthinkable situation: who will care for my child if both of us parents died at the same time?
But financial planners suggest you should sit down and create a will designating a guardian to rear and nurture the child and a trustee to control money issues.
 These people may, in fact, be two different people. Your sister may provide the most stable environment because she's got a child of her own, but a close friend who's an accountant may have a better perspective on financial issues. Be sure the two people you choose can work together.
"Have an attorney help you write a will or use computer software that's out there," Hoeppner said.
Dying without a will is known as intestate, which means you leave it up to the state to decide who will take care of your child. Many people with new babies name their own parents as a legal guardian -- a no-no, because grandparents typically die before their children, experts say.
To get started finding a guardian for your baby, here are some questions to ask yourself from Nolo.com, a self-help law center and legal publishing company on the Web.
1.Do you have confidence in the prospective guardian?
2.Is your choice physically able to handle the job?
3.Does he or she have the time?
4.Does he or she have kids of an age close to that of your child?
5.Can you provide enough assets to raise the child? If not, can your prospective guardian afford to raise the baby?
Off to college
Planning long-term for a new baby who hasn't even entered the world can be difficult, but financial planners say now is the time to start thinking about college for your tot.
Opening an education IRA is an option. However, because the maximum contribution for an education IRA is only $500 per year per child, your savings over about an 18-year period won't add up to that much, some planners say.
Click here to get the details on Education IRAs!
Instead, said  Judy Miller, a CFP in San Francisco, open a growth stock mutual fund account with a well-known fund company and begin contributing as much as you can. Earmark that account for educational purposes only. Then you're not limited by contribution limits.
Miller suggested the Vanguard Growth Index Fund (VIGRX) or the Vanguard 500 Index Fund (VFINX), which both closely benchmark the S&P 500 Index, which historically has returned more than 10 percent.
Of course, you don't pay taxes on the mutual fund until you take money out. You will pay capital gains on how much your money grows through the years.
For example, if you invest $500 and sell it a year later for $1,000, then you would pay capital gains tax, which is calculated at 20 percent, on the $500 you earned.
"It's a control issue," Miller said. "In an education IRA, you could pick the same mutual funds, but you can do anything you want with the money."
Save, and save often
Let's say you and your spouse have a combined gross salary of $100,000. You're not exactly working at start-up dot.com companies, but you're doing pretty well for yourselves. So Miller suggested that you try to put away 10 percent, or $10,000 a year, in savings.
You never know when you or your spouse will be laid off or lose your job altogether. And now that you're planning for three people, you also don't know when a medical emergency will come up and you'll need to tap into other assets.
So set up an emergency fund worth about three to six months of expenses. To approximate this amount, add up your rent, utilities, food, car payments, insurance, even entertainment and vacation expenses for a month's time, and multiply by six for a more conservative estimate.
Then begin saving for this amount in a money market account at a local bank so it can be easily withdrawn, Miller said.
Now that you've covered for emergencies, think about retirement. Even though you're only in your 20s or early 30s, now is the time to stash away as much as possible in your nest egg.
You've heard it time and time again: Maximize your 401(k) plan at work.
"A young couple should be doing maximum saving so they can save for a house, college, retirement, whatever," Miller said. "When you're a young couple, shoot for at least 10 percent and you will have money."
Staff Writer Jennifer Karchmer covers retirement and estate planning news for CNNfn.com. Click here to send her e-mail on these issues. 
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