Welcoming a new baby to the world is an immense joy; but it also comes with a huge learning curve, from figuring out how to care for an infant to reworking your budget to cover new costs.
Find out how to financially prepare for a baby by following these five steps.
Check Your Health Insurance Coverage
One of the biggest expenses that comes with having a baby is your medical care. Once you find out about the pregnancy, check your health insurance plan to see what’s covered, including:
- Prenatal care
- Labor and delivery
- Postnatal checkups
If your written policy seems murky, call customer service and have them walk you through your coverage and in-network healthcare providers.
Start saving up cash to pay your deductible and anything else that’s not covered by your health insurance company.
Find Out Your Employer’s Parental Leave Policy
Your next step in preparing financially for a baby is to research your employer’s parental leave policy. This includes both parents since more and more companies are beginning to offer paternity leave.
Find out if you qualify for paid leave and consider if you want to take unpaid leave as well. If so, make sure you have enough savings to cover that gap in income on top of your new baby expenses.
Prepare for Upfront Costs
Bringing a new baby home requires a lot of gear. Talk to friends and family who have recently had kids and ask about their must-have items versus “nice-to-haves.”
Plan for a quality infant car seat, a crib or bassinet, diapers, and potentially formula. Some items can be purchased secondhand while others might be covered if you have a baby shower.
Start researching the purchases you’ll need, prioritize them by necessity, and devote part of your savings budget to them.
Research Child Care Options
A major financial concern for new parents is how to plan for child care once their parental leave ends. If one parents decides to stop working and stay at home to care for the child, determine how the loss of that income will impact your finances.
Alternatively, you may research daycare options to care for your infant while both parents work. Start this process early in the pregnancy to not only get a realistic idea of prices, but also to reserve a spot for your child.
Infant care costs vary drastically depending on where you live. For instance, in Alabama, the average annual cost is $6,001 whereas New York residents pay an average of $15,394, according to the Economic Policy Institute.
Plan for the Future
As you prepare for the upfront and ongoing costs of having a baby, your final step is to prepare for your child’s financial future. Start by getting a life insurance policy for both parents.
A relatively low monthly premium can offer a lot of financial protection in case something happens to one or both parents.
Also explore your options for college savings plans. As college tuition costs continue to rise, it’s never too soon to start saving. Talk to a financial professional to weigh your options and find the best savings vehicle.
The earlier you begin putting money away, the more growth you’ll see over the next 18 years.
The financial burden of having a baby may seem overwhelming at times. But just as your new child gets nine months to prepare for his or her arrival, you get the same amount of time to get your money in order.
With proper planning, you’ll welcome your new baby to the world with less stress about your finances.
