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7/14/2017

How to Financially Prepare for: Having a Baby

by Elizabeth S.

FinancialBaby

Having a baby is a special time in a parent's life. However, it can be hard to enjoy those precious moments if your growing family is causing financial strain. According to Parenting.com, the average family spends $12,000 on child-related expenses in their baby's first year. That doesn't include the cost of prenatal care and childbirth. Whether you're thinking of starting a family or you're already expecting, we have a few tips to help you financially prepare for a baby.

 

FinanciallyPreparefor_Baby_Chart

Get Your Finances on Track

Getting your finances on track for your growing family can be daunting. Below we've listed the five most important areas to focus on.

  1. Income - What does your income currently look like, and how will it change when the baby arrives? If you've married and either you or your spouse will be staying home with the baby, start planning ahead for that adjustment in income. If your current income will not be able to provide for your child, start looking for potential side-hustles, other streams of revenue, nonprofits, or financial aid.
  2. Budget - If you are not currently budgeting, now is the perfect time to start. If you're trying to get pregnant or are a few months along, you will want to adjust to budgeting before the baby arrives. Babies can take up a lot of room in the budget in their first year. Do your research and think ahead to what you will be regularly spending money on before AND after the baby arrives. Work these costs into your budget now to get comfortable with your new spending limits. Financial strain can cause additional stress on new parents. Add sleep deprivation to the mix, and it's a recipe for disaster. Get on the same page with your partner or spouse, and adjust to your new budget while it's still just the two of you.
  3. Debt - If you've been working for years to pay off your debt, hold back on this for now. It may seem counter-intuitive to put a hold on your debt while bringing a baby into the world. However, if you keep up with your minimum payments and channel the rest of your funds into saving up for your baby, it will make the transition into your new budget much smoother. Once your finances are stable again, you can go back to focusing on debt, but for now, focus on one thing at a time.
  4. Emergency Fund - If you don't have an emergency fund, start putting money away each paycheck. Your emergency fund should be about six months of expenses. This gives you financial security in case of unexpected accidents, expenses, or losing your job. Also, kids get sick easily and tend to be accident-prone, making surprise medical bills more frequent.
  5. Smart Spending - Look at your current expenses and see if there are any areas you can save money in. Can you save money on groceries, eating out less, your gym membership, a smaller cable package, off-brand items, or cutting out any other unnecessary spending? A few months ago, I challenged myself to minimize my monthly grocery bill. I switched to a less expensive grocery store, planned out my meals, and opted for frozen fruits and veggies when possible.  Just those few minor changes cut my weekly grocery bill almost in half, so don't underestimate the little expenses. They do add up.

 

ChildCarseat

Focus on Buying Necessities First

When you find out you're pregnant, it can be hard not to rush out to the store to buy all the adorable onesies, tiny socks, and nursery decor. Take a deep breath and slow down. Your family and friends will most likely give you more baby accessories than you need as baby shower gifts. Focus instead on just the necessities, and never buy anything you can't pay cash for.

If you need help buying higher-price items, ask your loved ones for hand-me-downs or a little financial help. There are also nonprofits, like Baby2Baby, who provide affordable or free baby supplies for parents in need. Keep in mind, you have nine months to save up for the essentials. It's better to slow down, take your time with items you need, try to find second-hand or discounted items, and save up over time so you can pay in cash.

 

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Prepare for Medical Expenses

According to Parents.com, the average cost of prenatal, delivery, and postpartum health care is almost $9,000. However, there are many factors that affect the cost of your care, including vaginal birth or C-section, premature birth, pre-existing health conditions in mother or baby, and any complications that arise during delivery.

Check your health insurance coverage for a summary of your benefits pertaining to pregnancy and childbirth. According to healthcare.gov, all qualified health insurance plans are lefally required to provide care before and after your child is born, but you should be aware of your coverage and plan accordingly.

From prenatal to pediatrician, make sure you find doctors who are covered by your health insurance. It's smart to start looking for a pediatrician ahead of time, so you have a physician in place if your baby gets sick. You will also need to add your baby to your health insurance plan as a dependent.

 

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Prepare for Baby's First Expenses

Babies require a lot of equipment, like cribs, changing tables, car seats, clothing, and toys. Check out our blog post on buying baby supplies on a budget for more information.

  • If you are able to, breastfeed for six months to a year to save money on formula
  • Never buy anything you can't pay cash for
  • Ask for help from friends and nonprofits or seek financial aid
  • Buy gently used items when you can

Apart from baby supplies, childcare is a significant expense for new parents to take on in the first year. For many parents, childcare is a necessity. You can choose from a daycare, home daycare, or a nanny. Of course, there are pros and cons to each option. Daycare facilities offer the most socialization and regulations on care quality. Home daycare is typically the most affordable option, but there is less regulation and accountability on caregivers. Nannies provide personalized childcare in your home, but are typically the most expensive option. Your income and childcare principles will help you determine which option is best for you.

Think Long-Term

When it comes to long-term financial planning, one thing parents often forget is themselves! It's easy to start dreaming of the opportunities and experiences you want to provide for your child, but if you are unable to save for your own future and retirement, you should not start saving for your baby's future.

Think of it this way: if you don't save for your retirement, who will have to take of you in your old age? That's right: your children. When their needs are met, and your future is taken care of, start putting money away for your child's future, college fund, and any special experiences you want to give them. Until then, focus on necessities for the baby and future funds for yourself and your spouse. Your kids will thank you in the long-run.

I hope these tips help you feel more financially prepared to support your growing family. Welcome to the wonderful, chaotic world of parenthood. For more money-saving tips, visit our blog.

 

 

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