You are expecting a baby, congratulations! Whether it's your first bundle of joy or fifth, it's always essential to revisit your finances before welcoming a new member to the family. Babies are expensive, and the cost of living is creeping higher every year.
From housing to education, childcare and clothes, there are a lot of expenses you'll have to consider moving forward. Even parents who already have children will need to consider how another baby on board will affect the current family budget. In this article, we'll address the five most important budgeting tasks you should tackle in anticipation of your new arrival. Before that, we will explore the order you should approach these concerns and consider how they can affect you and your newborn's life over the next year.
Setting Your Goals
There are nine months for you to plan your child's future, but that time seems short compared to not only their lifetime but yours as well. There's no possible way to account for all the variables, so you'll have to focus more on the present and foreseeable future rather than panicking over having your family budget set for life. It is wise to consider the first year as the most important and put some small measures in place to make the ones following that easier, too.
This guide is designed to help you get your family's financial foundation stable so you can build on it and adjust according to your income level, added expenses, and needs. Determine what is most important to you regarding baby prep and use a checklist to help keep you on track. Being able to have a visual of your tasks can help you stay organized and feel less overwhelmed during this transition.
Maternity Care and Delivery Costs
Mom's healthcare will be the most pressing, and medical bills for ultrasounds, prenatal checkups and any additional tests or care can quickly pile up. In the United States, the average cost of having a baby via vaginal delivery at a hospital is between $5,000 to over $10,000. Additional costs are added if you need extra care, have an epidural or your infant needs medical attention after delivery. You cannot know to the dollar how much your pregnancy will cost you (Alfieri, 2017) but it is essential that you be informed of all the potential expenses.
If you do not have health insurance, paying for labor and delivery services out-of-pocket could quickly cause your family to spiral into financial disaster. You'll also need to plan ahead for time off work. Are you going to be staying home on maternity leave, and if so, how much money can you expect to lose during that time? If your partner also plans to take some time off work, how much money will you need in savings to support yourselves while you're at home?
Childcare Expenses
You can go about childcare a few ways:
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Reduce work hours to be at home more.
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Have grandparents or family members watch the baby while you work.
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Hire an in-house nanny or au pair.
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Put your child in a daycare facility.
The cost of each of these varies significantly, and the option you choose should be based on both preferences and budget. Some parents are okay with leaving their newborn at a daycare with specialized infant services, while others want to take time off work and be at home while their baby is still so small. Expect to pay anywhere between $8,000 to over $11,000 per year for full-time childcare services in the United States, whether you have your baby at a daycare or looked after by a nanny.
Check Your Current Budget, Including Debt
How much money do you have leftover after all your obligations are accounted for each month? Are your credit card bills and student debt manageable, or do you find them to be far more expensive than you can comfortably spare? Many parents are coping with the reality that their child will be in college while they're still paying off their own student loans. This might be frustrating, but it doesn't have to be disastrous for your savings and future plans. Consider consolidating credit cards and refinancing your student loans. Look into student loan refinancing with a private lender to lower your monthly costs, get a lower interest rate and enjoy more financial freedom.
Life Insurance
You should purchase or revisit your life insurance policy after you have a baby. If you already have children, then you'll want to add your newborn as a beneficiary and possibly increase the death benefit. This will result in a higher monthly premium, so keep that in mind as you explore coverage options. More expensive policies do tend to come with a higher cash value, though, which you might be interested in as a form of retirement funding down the line.
Life insurance might be something you do not feel you need when you are single, but it is an absolute must for any parent. Your baby's future should always be accounted for, including an appointed guardian and education costs. You may need to adjust other monthly costs to account for your life insurance policy, so keep that in mind as you work on securing the right balance and coverage.
Health Insurance and Pediatric Care
Having a baby is a qualifying life event, which means you are eligible to modify your existing health insurance policy or apply for a new one within 30 days. During this month period, you'll have to establish a relationship with a pediatrician. They'll oversee your baby's first checkup, vaccines and more. Make sure you add your newborn to your coverage as soon as possible to avoid any additional out-of-pocket costs.
Consider your own healthcare needs as well. They change after childbirth. Do you feel comfortable with your gynecologist, or would you like another one who can support you on your transition through motherhood? Parents may also need greater access to mental health services as they adjust to the changes and any impact the baby has on their mental health.
