Blake Lively Says Daughter James Has Some Hilarious Halloween Costume Ideas for Baby Sister Inez

Blake Lively and Ryan Reynolds‘ older daughter James is all about Halloween dress-up, but she has a few stipulations.

In this week’s issue of PEOPLE, the All I See Is You star dishes on her 2½-year-old’s current request for family costumes — and it sounds like James’ baby sister Inez, 1, might be getting the short end of the stick.

“My daughter suggested that our youngest should be Mike Wazowski, so I thought, ‘Great, we are all going to get to be different characters from Monsters, Inc.,’ ” recalls the mother of two, 30. “But then she suggested the baby be Mike and that she gets to be Cinderella.”

“Or that she gets to be Moana and the baby gets to be Hei Hei,” Lively continues. “Or she gets to be Anna [from Frozen], and so you would think the baby gets to be Elsa. No, the baby gets to be the gecko from Tangled. Basically, the baby gets to be the goofy animal sidekick, while our daughter gets to be the princess.”

Want all the latest pregnancy and birth announcements, plus celebrity mom blogs? Click here to get those and more in the PEOPLE Babies newsletter.

RELATED GALLERY: The Happiest Halloween on Earth! 10 Disney Character Costumes Your Little Trick-or-Treater Will Love

James is a big fan of Moana, as well as The Wizard of Oz — and one other unexpected choice of film.

“She weirdly gravitated toward E.T., which just shows good storytelling is good storytelling,” Lively says of her older daughter. “Steven Spielberg knows what he’s doing. I won’t let her watch the whole thing, because it’s a little scary.”

That’s not to say the Gossip Girl alum is an overly strict mom. “I think it’s hard to slap labels on any parents because it’s just so tricky,” she explains. “Every moment, you’re figuring out what the heck you’re doing. You think, ‘Should I be more strict or should I be more, I don’t know, emotional?’ ”

“If anybody knows how to be a parent, I feel like grandparents really know how to be parents,” Lively adds. “But parents, you just figure it out as you go.”

RELATED VIDEO: Blake Lively Calls Her Younger Daughter a ‘Baby Viking’ Because of Her Love for Red Meat

Lively may not know every in and out of parenting quite yet, but she and Reynolds, 41, have found a balance when it comes to their professional and personal lives. In fact, four months after James was born, she started filming All I See Is You — which she admits “was not enough time.”

“I’m lucky to be able to bring my baby to work,” Lively says. “So she’s either with me or, when I’m shooting a scene, she’s one room away. If she really needs me, I can pop over there.”

“What’s nice about that age is that when I’m shooting a 19-hour day, I’m not messing up her schedule. There’s no bedtime — she’s just up every two hours anyway,” the actress recounts of James’ infancy.

“So, she’s just with me wherever I am on location, and we go home at whatever hour I go home, and go to work at whatever hour I go to work. That was almost easier than her being 2 now, because there’s nap times and bed times.”

FROM PEN: How Today‘s Savannah Guthrie Copes With a Toddler, a Newborn AND 3 a.m. Wake-Up Calls!

RELATED GALLERY: “If I Could Spit Out a Litter of Kids, I Would”: Blake Lively’s Most Memorable Motherhood Quotes

The star admits that though she has figured out how to prioritize both a career and parenting, some aspects are still tough — like getting her Zs in.

“She finally started sleeping through the night, because she was old enough,” Lively explains of Inez. “Then my older daughter, James, decided that she doesn’t sleep through the night anymore.”

“It’s been almost three years of not sleeping,” she laments. “You don’t sleep when you’re pregnant, either.”

All I See Is You opens nationwide Friday.

For more about Blake Lively’s new film and her life at home with husband Ryan Reynolds and their two daughters, pick up the latest issue of PEOPLE, on newsstands now.