7 Things to Do to Prepare For a Baby FinanciallyMay 20, 2021
Preparing for your little one can be an exciting time. Whether you are pregnant or planning to get pregnant, it’s important that you prepare for your baby financially. Many parents are unaware of the actual costs of raising a child. Getting wrapped up in the fun stuff such as putting together the baby’s room is great, but you want to prepare your wallet for the changes a baby brings to your finances. And you want to make sure you are ready for your future. Below are some things you should consider when preparing financially for your baby.
Understand Your Health Insurance Coverage
Pre-baby you might have picked a cheaper insurance plan for your and your spouse. Now is the time to review that plan. Look at what it will cost to add your baby to the plan. And also look at the out-of-pocket expenses, as well as co-pays and in- and out-of-network doctors. You’ll want to make sure you choose a pediatrician who is in-network for a lower cost.
Finally, understand what is covered for yourself as far as pregnancy check-ups, ultrasounds, testing and the delivery of your newborn and your hospital stay. Once you better understand your health insurance plan, you shouldn’t be surprised with any expenses or bills, and you can make sure you have the best plan for your family.
Check on Your Leave Policy
If you and your significant other work, look into the leave policy at your employer. Every state, and every employer has different policies. Some offer full-paid leave, while others offer partial-paid leave or unpaid leave. Take time to understand how the leave works, and how you will get paid during your time off. If you intend to take unpaid leave, how will that affect the finances in the household? Make a plan on how you will save or cut back while you are at home caring for your newborn.
Prepare Your Budgets
Babies come with a lot of expenses – both before and after they are born.
--Prepare for a baby financially before the birth – Medical costs aside, start your list of baby needs ahead of his or her arrival. Think everything from making the baby room in your home to high-chairs, strollers and more. Take a look at you and your partner’s income and make a pre-baby budget. Make lists of expenses – one for must-haves, such as crib, changing table, car seat, etc., and one for optional items like designer clothes or diaper bags.
--Prepare for a baby financially after the birth – You’re going to have recurring costs that you didn’t have before. Diapers, baby food, formula, milk, child care and more. There is no return policy on babies, so make sure your budget can handle all of the new expenses that come with your bundle of joy. If you plan for them now, hopefully there won’t be too many surprises later when it comes to expenses.
Start a Rainy Day Fund
If you haven’t already, start that rainy day, emergency fund. The cost of raising a child can be unpredictable. Unforeseen medical expenses, allergen free formula, and occupational therapy are just a few of the unexpected costs that can wreak havoc on your budget. You’ll want to have some disposable income to soften the blow of these expenses. Financial experts recommend saving at least three to six months of living expenses to start. If you start saving a lot pre-baby, your emergency should be ready for those unexpected moments life throws at you.
Plan For Child Care
One of the most important things will be who is caring for your child. If you or your partner plan to quit working and be a stay-at-home parent, make sure that there will be enough money with just one income. If you live a certain lifestyle with two incomes, this could be an adjustment – take a look at current expenses and use your baby budget plan to make sure you will have to afford everything.If you both plan to head back to work keep in mind that child care is often the second largest expense after housing. Use the Upfront Daycare Calculator to see what the average cost of childcare is in your neighborhood. Come up with a budget for how much you can afford to spend on child care and search for daycares in your budget at Upfront.
It’s tough thinking about the future, especially when you have a tiny, newborn baby in your arms. But planning for the future is important. Not just budgeting for daily expenses, but for your retirement and for your baby’s education.
Make sure you are contributing to your company’s 401k, many offer this, as well as a company match. Contribute a percentage of your paycheck you're comfortable with and consider adjusting that percentage through the stages of your child’s life. This will help you save for your future retirement.
Private schools and college can be costly. While you may think it’s too soon to think about your child’s education, it’s definitely not. See if your company offers the 529 plan and start one sooner rather than later. Or create a bank account specifically for your children when they are born and set money aside monthly into it. You can also suggest to family and friends to contribute to this instead of buying gifts. By the time they are grown, you can use this money for their education.
Protecting Your Children
While you want to think you’ll live forever to protect your children, everyone knows this may not be the case. You want to be prepared for anything, and you don’t want your children to suffer financially if something happens to you or your partner. Sit down with your partner to go over items such as life insurance, disability insurance and, of course, your will. Also take time to update your beneficiaries to your children on things such as bank accounts, investments and that 401k.
While all of this may seem overwhelming, if you plan a little each day, week and month leading up to your baby’s arrival, you will be able to prepare for a baby financially. And remember to enjoy the little things as they grow up, because before you know it, you’ll be dipping into that college fund!
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