When you’re expecting a new baby, advice seems to come from just about everywhere. From family members and well-wishers to entire best-selling books, there’s no shortage of places to find friendly suggestions about how to be a parent. But for all the advice, not much is said about money. And yet bringing another human being into the world is a major financial undertaking. So at the risk of giving you even more advice, here are 8 things you can do to prepare financially for a new baby.
1. Pre-Baby Budget
Bringing a new baby into the world also means bringing a lot of new stuff into your home, including a car seat, stroller, and crib. And it all costs money. Set a realistic budget that will allow you to buy everything you need for your little one without necessarily going overboard on buying the fanciest, most expensive baby things money can buy. And don’t forget to plan for the cost of checkups and prenatal care for mom and baby.
2. Post-Delivery budget
As you meet with doctors to plan your baby’s birth, ask hospital administrators and insurance providers about the out-of-pocket expenses you will have to pay after the baby is born. Not all expenses are predictable, but you should at least plan to pay your out-of-pocket portion of doctors' bills and the cost of a hospital stay for baby and mother. Also, save a new place in your budget for recurring costs like buying food, clothing, and diapers.
3. Plan Leave
Recovery from having a baby can take time. And learning to become a parent doesn’t happen overnight. If you haven’t done so already, check with your employer to see whether you and/or your partner can get paid paternity and/or maternity leave. If your leave isn’t compensated, have a plan to cover bills and other expenses during the time you take off.
4. Child Care
If you plan to enroll your child in daycare so you can get back to work, be prepared for a major expense. Whether in-home or at a daycare facility in your neighborhood, the cost of child care can exceed $20,000 a year. That’s a cost on par with college. If you can afford to be at home with your child or even work from home, you can save a lot of money on childcare. If not, be sure to budget for care expenses every month moving forward.
5. Insurance
Now that you have a new dependent, you’ll need to put an extra person on your health insurance plan. You can check with your current insurance provider to see what adding a dependent will cost you each month. And because that little one now depends on you for everything, it’s a good idea to have a life insurance policy, which can vary in cost.
6. Start Saving
It’s never too early to start saving for your baby’s future. With a tax-advantaged investment plan, you can save for your kid’s college or other upcoming expenses. And the earlier you start, the more opportunity you give your investments to grow. Talk to an adviser about the risks and benefits of investing your money, as well as any other charges and fees associated with investing in your state.
7. Estate Planning
One of the most important things you can do as a new parent is to make a will. A will allows you to dictate who you want to care for your child if something were to ever happen to you. It also gives you an opportunity to spell out how your assets should be distributed and who should administer those assets upon your death.
8. Emergency Fund
Kids can be accident prone. They also depend on you to make a living to give them the necessities of life, including the unexpected expenses. Now is the time to start planning and saving for emergency expenses. You should have at least 3 to 6 months’ worth of living expenses saved away in case you’re unable to work or your little one incurs some unforeseen costs.
Having a new baby isn’t all dollars and cents, but being financially prepared can make the experience a whole lot smoother. Plan ahead, start saving, and expect to pay for the unexpected and you and your new baby can be financially prepared for just about anything life throws your way.