Check out these upcoming events at iTHINK Financial.
Simple Tips to Financially Prepare for Your Baby's Arrival at Home
By: iTHINK Financial | Feb 01, 2021
As a new parent, it’s easy to be overwhelmed by the cost of having a baby. The USDA estimates it costs $233,610 to raise a child. If you’re worried about how you’re going to plan for your new little bundle of joy, you’ve come to the right place. We’ll go over everything you need to know about how to financially prepare for your baby’s arrival.
Affording a child isn’t cheap, but it’s a lot more feasible when you plan for it. From healthcare costs to your emergency fund, we’ve rounded up our favorite financial tips for having a baby. Here’s your go-to new parent checklist.
Get a Better Understanding of Your Healthcare and Costs
One of the biggest to-do items before having a baby is to take a look at your insurance plans. You’ll want to give your insurance provider a heads up that you’re expecting and that you’re adding a child to your plan in the near future.
You or your partner’s obstetrician's office will often coordinate a meeting to go over your insurance plan. They will discuss how much your visits will cost each time and what you’ll need to pay when you deliver.
Depending on your insurance it could cost a few hundred dollars to several thousand dollars to deliver a baby. Discussing this with your insurance provider will help you plan for these costs. You can also use a health savings account (HSA) to cover certain out-of-pocket medical expenses.
After having a baby, the last thing you want to do is fall behind on medical bills. The more you know ahead of time, the more you’ll be able to plan. During this time, you’ll also want to find a pediatrician in your network as well.
Plan Your Maternity or Paternity Leave
One expense you’ll need to keep in mind is the time and money it costs to take off work if necessary. Whether you’re the mom, dad, or partner, you’ll need to take some time off to bond with the baby. For moms, there’s a time after birth needed to rest and heal.
How long you take for leave depends on a variety of factors. In some cases, this is your own personal choice. In other situations, your employer or your benefits package will dictate how long you have.
There may also be some medical reasons why you need to take more time than planned. For some people, if a longer leave isn’t paid, they take time unpaid in order to have more time to care for and bond with their baby.
There’s no right or wrong answer to this question. Take some time to discuss this with your employer, HR coordinator, and your partner or spouse. Plan out your leave and how you’ll pay for any time unpaid.
Make a Revised Budget
Before you have a baby, it’s time to make a budget. If you already have one, you’re on the right track. If you don’t, now is the time.
Start by tracking your income. Next, look at your fixed expenses. Things such as your mortgage, car payment, and student loans are all fixed expenses. These are bills you have to pay.
Additional expenses include subscription services, gym memberships, and cable. These items are the ones you can cut if needed. When you write everything out, you may be surprised at how much you’re spending on things you’re not even using.
Now is a great time to cancel the music streaming service you didn’t know you had. The same goes for that group fitness class you never go to.
From here, you’ll see where you stand financially. Take a look at what you’re saving and what you’re investing. If the answer is nothing, it’s time to start. Next up, it’s time to estimate the additional costs your baby will add.
Common Baby Expenses
There are several expenses that are guaranteed to come with a baby. Your baby will eat solid food in no time. In the meantime, you may also need to budget for formula or breastfeeding supplies.
In addition to food, your baby will also need childcare at some point, as well as supplies. Childcare costs will vary significantly. In some cases, you, your partner, or a family member will be caring for the child.
In other families, you’ll need to plan for daycare or the salary of a nanny. Other times, occasional babysitting, is all you’ll need. You can also plan for a slight bump in your water bill, electricity, and gas. It’s one more person coming into your household.
One of the biggest expenses is diapers. Most kids are in diapers until they reach two or three years old. After that, there are still potty training or overnight diapers used by kids into kindergarten. Don’t forget diaper wipes and diaper cream.
Create a Needs and Wish-List
Before a baby, many parents find it helpful to create a registry. This registry is a list of supplies and equipment you’d like to help you care for your new little one. While some receive these items as gifts, many people need to buy these items on their own.
Even with a baby shower, you’ll have a lot of things left to purchase. Babies use a lot of stuff. Get your wallet and your home ready for the invasion.
Your little bundle will need a place to sleep, things to play with, and a lot of stuff to wear. Babies grow quickly and those little shirts and pajamas, add up if you aren’t prepared.
Must-have baby items include strollers, cribs, changing tables, bedding, clothes, feeding supplies, rockers, portable cribs, and a car seat. Toys, bath supplies, an infant tub, sound machine, and baby monitor are also common baby expenses.
Before you bring home your baby, make a list of needs and wants. While some of these are given as gifts, it will be nice to plan for the items you’ll need to buy. Create space in your budget to pay for these.
Check or Start an Emergency Fund
If you have an emergency fund, take a look at where you stand. In your budget, carve out some money for saving. An emergency fund is a must with children. Emergency funds cover your mortgage, utilities, and living expenses if needed.
If you lose your job or an unforeseen financial emergency comes up, you need to be prepared. Kids need financial stability. If you aren’t making an income, think about how you’d pay for groceries, your mortgage, and expenses without a job.
To kick-start your emergency fund, take a look at your budget. Determine how much of your savings you’d like to go into this fund. If you don’t have any extra in your budget to save, it’s time to make some adjustments.
This is where cutting down on dining out, coffee, or luxury services will help. Saving $100 a month adds up to $1,200 a year. That’s $1,200 you could use to fix your car, pay a medical bill, or make a home repair.
Make a Move, If Needed
When your family is expanding, you might find the need to expand your living quarters as well. If you plan to move before the baby arrives, you’ll want to have your finances together.
Moving before your baby comes might be stressful at times but it will be well worth it. Moving after a baby gets a little trickier. Planning your move means making a budget for your new home, making your down payment, and finding the place you and your little one will call home.
Just because you’re having a baby doesn’t mean you have to move. The baby items that take over your home don’t stay around forever. If it makes sense financially, staying in your home with one child could save you a lot of money.
As your family expands to more than one child, you could explore moving at a later time. Saving all that money with one child puts you in a better place financially when their siblings arrive, if you’re having more children.
Plan Your Childcare
One of the biggest baby expenses for most families is childcare. If you’re using some form of paid childcare, you’ll want to start planning before the baby is born. Many daycare centers have waitlists.
During your pregnancy, you’ll want to start touring different daycare or Montessori school facilities. Be sure to check if they accept newborns or only older children. If the waiting list is months long, you’ll be glad your child has a spot when your maternity or paternity leave ends.
For nannies, it’s helpful to interview them before the baby arrives. You’ll want to meet with them and get a vibe for their personality and caregiving style. You’ll come up with a fair salary that works for everyone.
In some cases, full-time nannies also receive paid time off as well as vacation days and holidays. These vacations can be scheduled with yours to prevent you from having to pay for alternative childcare while they are gone.
For other families, it’s preferable to pay a friend or family member full-time or for short periods. Whichever way you go, be mindful of your budget and track how much the salary or tuition will cost.
Adjust Your Insurance, Wills, and Beneficiaries
After your baby is born, you’ll need to notify your insurance company. Your pediatrician will visit you in the hospital. You or your insurance company will start to be charged for these visits right away.
You’ll also need to update your will. If you have an estate plan or trust, update these as well. For life insurance and any other policies you have, make sure to add your child as a beneficiary if you’d like.
Save for Their Education
Many parents struggle with paying for college. There’s a natural dilemma for many over whether they should pay for some, none, or all of their child’s education. There is no right or wrong answer.
When it comes to how much to save for your child’s education, it is completely up to you. If you aren’t financially able to save for it all, put away what you can. Anything you save will go a long way when they are ready to go to college or trade school.
One thing to remember is that your child can also pay for portions themselves. Not all kids go to college either. It’s equally as important to pay for other things and save while your child is young.
Putting all your savings into a child’s college fund isn’t always the best use of the money. This figure, however, is completely up to you.
Make Your Retirement a Priority
One thing to keep in mind is that you always need to make saving for retirement a priority. Even with children, you should be maxing out your 401(k) for as long as possible if you have one. Opening an IRA is another way to save for your retirement.
Any investment you make in yourself is one you’re doing for the whole family. Saving for retirement shouldn’t feel selfish. Keep making it a priority after your child is born. The longer you’re able to save, the more comfortable you’ll be when you stop working.
Financially Prepare for Your Baby's Arrival
When you learn you're expecting, it’s time to financially prepare for your baby’s arrival. While getting the nursery set up is important, it’s equally as important to get your finances in order and make a plan.
If you’re ready to speak with a financial advisor about wealth management or opening new accounts, click here to get started. You’ll have one big to-do item marked off your baby check-list.
Not a Member? Join us today!
It's easy to join! Apply for your lifetime Membership with iTHINK Financial in about 10 minutes.