Planning for a Baby


As rewarding and life-affirming as it is to have a child, a lot of planning and preparation is required as well. You probably have a million things on your mind from diapers to car seats, but preparing financially will make one less thing you need to worry about. Here’s what you should consider before welcoming your new addition.

  1. Make sure your emergency fund is in place and your debt is under control. Increase your emergency fund amount to cover added costs you’ll have once the baby is here. If a parent will stop working after the baby’s arrival either temporarily or permanently, you will need savings and a revised budget to adjust to your new income. If both parents will continue to work after your parental leave(s), you will need to research child care options. Good facilities may have waiting lists and you don’t want to be caught in a bind when it’s time to return to work. If your employer offers a Flexible Spending Account (FSA), you may be able to use it for child care.

  1. Estimate the medical costs. Research with your current health insurance provider to figure out what is covered (and not) by your plan. A recent study found that the average out of pocket cost of having a baby with employer insurance is around $4,500. You will have regular doctor’s visits and prenatal tests. Health screenings, ultrasounds, prescriptions and other items may also be required. Make sure you’re familiar with what out of pocket expenses could be- copays, deductibles, coinsurance, etc. You’ll also need to consider the delivery costs including hospital stays, anesthesia, delivery and pediatrician care. If you have any questions, contact your health insurance provider to avoid unexpected costs. Remember to add your infant to your health insurance plan after the birth.

  1. Create a budget for pre-baby items. It will be tempting to buy everything you see, convinced that you’re absolutely going to need it, but ask other new parents what they actually used when you start making your must-have list. Don’t forget to budget for maternity clothes, too! If you outline a budget beforehand (and stick to it), you’ll be able to keep the spending under control. 

  1. Consider insurance and estate planning. With a child, you’ll want to make sure they’re taken care of should anything happen to you or your spouse. Term life insurance is an affordable way to cover costs (child care, salary, college, mortgage) should you pass away during child rearing years. You should have a will and estate plan in place for guardian appointment for your child and distribution of your assets. 

  1. Start a 529 Account. You’ll probably start getting gifts, and some of those may be cash. Grandparents love nothing more than saving for college so stash those cash gifts! Starting a 529 account is a good way to start saving. As with retirement, time and compounding are your best friends so it’s not too early to start.

Welcoming a new baby is an exciting time! As with most things, preparation is important to minimize the bumps in the road. Addressing these items now before your baby comes will help ensure everything is in order so you can focus on the more exciting things.

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