Conquer your student debt. Refinance now.
You are expecting a new addition to your growing family—congrats! There is so much ahead of you, and tons of organizing to do before and after the baby is born.
While it might feel like there are too many decisions to make in just a short couple of months, you will want to prioritize making a new family financial plan over what nicknames your parents will want to be called as grandparents.
Below, we break each task into manageable to do’s that you can accomplish in the next year.
Saving Before Baby Arrives
Once the baby is born you might find you have far less time than you did before. Now is a great time to get your finances in order, before the sleep deprivation starts.
Understand your health insurance and anticipate costs
It can be hard to estimate the cost of healthcare from prenatal care, delivery, to post-partum care, making it tricky to build a budget in advance. According to a 2007 Thomson Healthcare study for March of Dimes, the average cost of having a baby with insurance in the US was $8,802, but there is a lot of room for variation in that bill.
If you haven’t already, now is the time to pick out the hospital or doctor that you would like to go through the birth with. Review your health insurance plan and make sure you are picking a healthcare provider in your network. This doctor might also have recommendations for pediatricians in your network.
Start or increase your emergency fund savings
An emergency or “rainy day” fund is important for all adults to have. Now that you are working on a new addition, you might find that there are more unexpected costs that cause you to dip into this fund.
Especially if this is your first child, it is better to over-budget your emergency savings fund, rather than under-fund. After the first, you might find you are better prepared for the price tags of unexpected doctors visits or childcare and can build a more comprehensive budget.
Cut unnecessary spending from your budget
It can often be easier to cut spending if you have a goal or timeline in mind. Use the arrival of the baby as a deadline to cut out unnecessary spending habits.
Not sure where to start? Review your credit card bills from the last three months and highlight any purchases that you would classify as “wants” vs “needs”. You might not be able to stop all extra spending, but it is good to see how those little personal treats can add up at the end of the month.
Pay off unnecessary debts
Have any bills looming over your finances that you could knock out in the next couple months? Reducing the clutter in your financial life now will pay dividends in the future when you have more expenses related to your baby. Look into ways to optimize your dollars to finish off bills that have lingered too long.
Plan and save for family leave from work
It is important to figure out as a family how you will take your maternity and paternity leave. Some choose not to take their leave at the same time to have one parent at home full time for longer. Each office will have its own policy to keep in mind when making this decision.
Another big decision to make before the baby comes is if both parents will be working after the baby is born. Some families decide that one parent will stop working for the short- or long-term to be the full-time caregiver. Before making this decision, it is important to make sure you can sustain your growing family on a single income. However, both parents returning to work might be more expensive at first if childcare in your area is costly or competitive. Break out the spreadsheets now and figure out which is a good fit for your family.
Begin to budget for childcare and supplies
A baby comes with a whole new set of consumer staples many of us never consider until pregnant. It is hard to budget for things you don’t know, so start looking around at the supplies you know you will need and decide what you need to put aside each month for these expenses, building in some wiggle room until you get into a cadence.
The baby shower can also be a great time to make a list of one-time purchases that you will need to make for the baby’s arrival. Similar to a wedding registry, it is important to have a mix of low, mid and high budget goods so your guests can pick something you would like at a price range they are comfortable with.
Saving After Baby is Born
Now that the baby is here, you can remove some question marks from your short-term budget. No more guesswork on how much you will be spending on diapers, you will quickly have a real data set. It is important to continue to organize and prioritize your family’s finances and to begin planning for the baby’s future.
Update your family’s insurance plans
Babies come with a lot of paperwork. Once you have a social security card for your newborn, you will want to update any existing life or disability insurance plans you have to reflect your growing family. If you didn’t already have life or disability insurance, now is a good time to consider these options as a family.
You will also want to add your child to your health insurance coverage. Most providers will give you a month-long window to add the child to your healthcare coverage, but it is important to do this sooner than later in case you need to make a doctors visit.
Create or adjust your will
It can be hard to think about, but it is important to have a will in place now that you have a child. You will be asked to designate a guardian who would take care of your child if anything was to happen. Don’t pick just anyone, really think about who you would be confident in raising your child if something tragic was to occur.
Be sure to add your child as a beneficiary to any savings plans you have as well. If you aren’t sure where to start, consider drafting a will with legal counsel to make sure you have accounted for everything.
Continue paying off debts and saving for retirement
After a baby is born, it can be easy to let priorities from before slip, and focus more on getting through each day. However, it is more important than ever for your family to pay off outstanding debts and build up a retirement account. No one wants to be a burden on their child later in life, so it is important to be proactive with your own savings today.
If you have to tap into your emergency fund in the first couple months, just make sure to top it back up before refocusing on long-term savings goals.
Create a savings account for baby
It is never too early to start saving for your child’s future. By opening a savings account today you can start building their assets before they can even count. Starting earlier is also the best way to let the magic of compound interest work for you.
Opening up a savings account can also be a great way to accept cash gifts from family members who want to help pay for your child’s future.
Research and open a college-specific savings plan
You might be holding your baby today, but in almost no time you will be touring colleges with your baby. One important step to help prepare your finances for that next step is to pay off any existing student debt your family might have. This will free up your income to be applied to your family savings.
While you might have student debt of your own now, it is important to also think about saving for their education. You might look into options like a 529 plan, which have further tax advantages than a traditional savings account. The catch is that funds in a 529 account can only be used for school expenses, and there may be other rules depending on the state you live in. Review your options with a financial advisor to make sure you have a plan specific to your financial situation and goals.