Having a baby is stressful enough without factoring in the costs associated with adding another member to your family. One study out of Australia showed that 71% of young couples who were expecting a baby in the next 12 months were experiencing financial stress. And, only 28% of people felt financially secure the year before they had a baby.
We understand the financial woes that come with being a new parent and we’re dedicated to helping you navigate them with ease. From knowing where to buy cheap diapers to learning how to budget your finances for a tiny new family member, here are the financial moves every new parent should take to prepare for a baby.
Anticipate Healthcare Costs
A family planning financial plan starts with first evaluating and anticipating all healthcare costs. Assuming that you have medical insurance, your first step will be to ensure that your obstetrician is an approved provider in your network (you’ll want to do this again when choosing a pediatrician after the baby is born). Then, you’ll want to discuss both prenatal care costs and delivery costs with them well before your due date. Doing so early on will allow you to truly assess the medical costs you’ll have to pay out-of-pocket and therefore plan for them accordingly.
Create a Pre-Baby Budget
Once you’ve got a good idea of the pre-baby costs that come with childrearing, it’ll be time to create a pre-baby budget. This will look different than your post-baby budget which will focus more on practical items such as food, diapers, and clothing. Instead, you’ll likely want to factor in the other non-medical costs of having a baby, such as purchasing necessary furniture, preparing the nursery, or even perhaps the idea of non-paid time off in the case that you want to take time off before the baby is due. With these numbers in mind, you can create a solid budget for the next nine months and adjust spending accordingly.
Create a Post-Baby Budget
While you’re working towards managing your expenses pre-baby, go ahead and take the time to draft up a post-baby budget as well. While you might not be able to guess at a few of the expenses until your baby is born, ask your parents or friends for advice on what they spent in the first few months after their children were born. Some standard expenses you can expect to add on to your monthly budget include recurring costs such as diapers, food, and childcare. If you already know that there will be recurring expenses for the foreseeable future, check out discount deals with Buy Buy Baby or learn how to save on diapers by buying in bulk via Amazon Mom. These types of savings strategies are important to search for now; once the baby is born it’ll be the last thing you want to think about.
Build An Emergency Fund
Financial experts recommend having at least six months’ worth of living expenses saved in an emergency fund at any given time regardless of whether you’re expecting a baby or not. However, once you factor in the accident-prone nature of children and all of the additional costs that come along with them (extra school supplies, money for new clothes as they grow, etc.), it’s more important than ever to start building an emergency fund. If you can, open a high-yield savings account that will help you grow your money more and try to put back 20% of your income towards savings.
Take Out Life Insurance
Life insurance is designed to financially protect you and your family against a worst-case scenario. And, while you plan to be around for quite some time, when you begin to think about the future of your children, life insurance begins to make sense. It’s an important part of safeguarding the financial future of your entire family and life insurance calculators can help you determine the appropriate coverage depending on your health and other factors. Forbes noted that many life insurance plans for young, healthy individuals don’t cost much more than monthly streaming services, making it one of the most cost-efficient ways to protect your family.
Get a 529 Plan
College is costly and starting to save while your child is young is one of the best strategies there is. Consider a 529 plan, which is a college savings plan that offers tax and financial aid benefits. While they’ve usually been used to pay for college-related expenses, you can now use them to pay for other education-related expenses that your child might have when they’re younger and attending K-12. Because there are different types of 529 plans available and each one comes with specific tax incentives depending on where you live, consult the plans that are available in your specific state.
Teach Your Kids About Financial Health
Once you’ve got your new baby financial checklist in place, be sure to think about all of the ways in which you’re going to teach your children about finances and money management as they get older. It’s never too early to start.
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