How To Prepare Financially For A Baby
There is a lot of preparation when adding a new baby to your family. Between preparing your body beforehand and preparing your home with all the things baby needs, the time flies by quicker than you expect! One of the big pieces of preparation that can make the transition smoother is financial preparation. Recent survey data from new parents shows that the average first year cost for your child is $13,186 which is generally higher that what most families budget for. Taking action on your financial goals before your little one arrives can make a world of difference in your experience. We all know that each child costs a tremendous amount of money! However, the specific hits to your budget and your financial priorities are the key things that you should focus on. Instead of focusing on the “average cost” of raising a baby, review your family plans to see how baby fits in successfully. It can feel easy to make room in our hearts for a baby but our pocketbook does not always make things easy! Here are some tips for how to prepare financially for a baby that will provide a smooth transition for your family.
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Prepare For Bringing Baby Home
The first tip for how to financially prepare for your baby is considering the actual cost of delivery or adoption. Regardless of how your baby arrives on this earth, there are various costs associated with actually bringing your babe home! Finding out early in your journey what costs will be included and a ballpark estimate is helpful for planning. In my first pregnancy, we asked for a breakdown at our practice of costs associated with prenatal visits and hospital stay scenarios based on our insurance and it ended up being around the estimate. Always assume you will pay more than you think if there are any complications that incur additional costs. If you are planning an adoption, your agency should be able to provide a breakdown of associated costs and when to expect them in your journey.
One massive factor in this area of costs is your health insurance at the time. Health insurance coverage can drastically affect how much you are paying for doctor visits, testing, ultrasounds etc. Things like hospital meals, c-sections, inductions, NICU time, anesthesia, etc. are additional expenses that can really add up. At the beginning of your journey, review your health insurance plan as well as any benefits offered through your employer that can support with baby related costs.
Prepare For Maternity/Paternity Leave
It is imperative to check in about all options available to you with your employer before baby arrives. The time right after baby arrives is critical, so you need to know how you will financially prepare for baby’s first weeks. Is maternity/paternity leave offered, and if so how long is it? How is maternity leave covered and do you need sick and vacation time saved up? What will you be responsible for paying for while on leave (ex. employer’s portion of health insurance?) Do you qualify for FMLA with your company? Are you eligible for short term disability? Are you able to take time away unpaid and if so, can you manage being unpaid for that time?
Being prepared for leave whether paid or unpaid crucial to allow you to enjoy the blissful newborn days! You want to feel prepared to start your leave without scrambling or missing out on potential benefits.
Related: How To Handle Working While Pregnant
Prepare For Baby Gear
Babies do not need everything, but they still need a lot! If you are having your first child, you will need to plan for sleeping, eating, travel, clothing and a safe baby environment. You will also want to plan for any monthly recurring expenses including diapers, formula, wipes, baby soap, medicines etc. My go-to for baby gear is buying great used condition products from Facebook Marketplace. You can often find new or gently used gear in your local area or from local moms groups. We also opted for a membership to stores that allow for buying in bulk for things like diapers and wipes. Think about ways to cut some costs and eliminate any unnecessary items from your list. A few baby items to be sure to plan for include:
- Crib, crib mattress, and sleeping areas such as a bassinet, co-sleeper, or pack n’ play.
- Car seat
- Diaper Bag
- Baby Monitor
During your pregnancy you will also want to think about plans for breastfeeding or cloth diapering as these can make a difference with how you need to budget. Similar to above, assume you may need to spend more so that you are prepared for any scenario. You never know when an allergy, or medical condition will result in the need for additional gear or routine changes.
Prepare For Childcare
UGH. JUST UGH. Childcare costs and finding the right solution for your family can be extremely daunting. Between daycare tours, nanny interviews or part time schedules, there are many different ways childcare can affect your budget. If you are planning to stay home with baby you will want to consider developing a new single income budget, retirement saving adjustments, and how benefits will be handled moving forward. If you are planning to return to work, you will want to consider your monthly childcare costs, sick time availability (because GERMS) and your schedule/income as you return. There are tons of different scenarios that could work for your family! Starting early helps you find the best setup for you and your little ones.
Prepare For Future Goals
Adding a baby to your life brings lots of financial changes, but you want to be mindful that you do not let these changes derail your long term goals. If you are currently contributing to retirement, you will want to look at your budget to see how you can continue monthly contributions. New parents can be overwhelmed with short term costs but it is important to continue pushing towards long term goals. Look at your savings or emergency funds to ensure you continue to stay on track. Do you have any major purchases you are planning for such as a house or new car? Think about how these goals fit into your new monthly expenses.
If saving for your child’s education is a priority for you, start exploring now what options are available for savings. Paying for educational costs involves numerous options so do some research on what aligns best for your goals. As parents, you will have a variety of different financial goals regarding your kiddos. They can be different than someone else, but whatever they are it takes planning ahead!
Prepare For The Unexpected
I hate thinking about this section and I hate writing about it to any other mamas reading. However, it is important when bringing a child home to prepare financially for the unexpected. This is more than just some baby extras or added hospital bills. Once you are responsible for a child it is important to plan for events in which you or a family member may need financial protection or care.
You should make sure your beneficiaries are updated on any policies you currently have and consider adding things like additional life insurance if you do not already have it. Think about creating or updating your will to include your wishes for guardianship and financial support. You should think about insurance or savings specifically for anything unexpected medically that could cause you/your spouse to be unable to work. I have a chronic illness, so these are things that we talk about frequently in our household. While these topics can be uncomfortable, tackling them is important for security and peace of mind.
I always recommend doing research beforehand to be as prepared as possible for bringing home a new child. There are tons of resources available such as this report that includes interactive graphs to help parents prepare and budget for child related costs. Bringing home a child is such a blissful and exciting time! Don’t let the heaviness of the financials detract from enjoying every precious moment by being as prepared as possible. You got this mama.
All the best,