Congratulations! You’ve got a baby on the way. No matter how your wee one is entering your family, there’s one guarantee: Kids are expensive. Yet most parents would agree that the opportunity to raise little humans is one of life’s most rewarding experiences.
Nevertheless, the financial transition from your pre-kid lifestyle to that of a responsible parent can be rocky. Even if you’re only a few weeks away from welcoming your baby, you can prepare for the financial shift ahead. Set aside time in the coming days to tackle each of these six tasks. Once done, you’ll have a clear financial plan for your post-baby life.
1. Understand Your Current Lifestyle and How It Will Change
You may be used to meeting up for drinks with your partner at a local brewery after work. Or perhaps you’re the first one to say yes to an impromptu weekend hiking trek. While you won’t have to eliminate these things from your life, you will be trading in much of your spontaneity. Your current lifestyle and how you spend will shift both for the sake of time and a balanced budget.
Review your current dining-out habits, grocery spending, vacation allocations, and more. If you’ve not kept a regular budget, draft up your actual spending so you know what’s normal for you. Now identify areas where you’ll add more, like groceries, and where you may spend less. Be realistic about your outlook as you consider your habits and how a baby will change them. You may spend just as much on restaurant food by getting delivery instead of dining out.
According to Chime, small things like using a round-up debit card can help you save money to help pad your savings. The last thing you want when you add a baby to your family is to put your finances in jeopardy.
Practice living on a post-baby budget before your child’s arrival so you can test it in a lower-stress environment. Adjust categories as they prove themselves to be too tight or generous. Add any savings you’re allocating to baby spending to your emergency fund to get twice the benefit from this exercise.
2. Take Medical Costs Seriously and Prepare for Multiple Scenarios
While you’ve likely already encountered medical bills for your prenatal appointments, have you considered the long-term financial obligation ahead? Delivering a baby is just the start of a lifelong commitment to medical care. If you’re expecting a normal delivery and healthy baby, you may have a baseline of what bills you’ll have to cover. But your expectations may not always match with reality.
Birth can be a traumatic event for both the parents and the child. While you shouldn’t overstress about the experience, you should prepare for what could happen and the costs involved. Review your medical coverage for baby- and parent-related care in all situations. Check that your providers are in-network to maximize your health insurance coverage. Talk with your doctor about optional procedures and common expenses that pop up.
If you’re delivering your child, you’ll want to think about pain management, delivery type, and potential complications. Neonatal intensive care unit stays during the first hours after birth are more common than you think. While essential, the high-quality, individualized care they provide to fragile newborns is expensive. If you can, update your health savings account contribution, review negotiated prices, and learn about payment plans as you prepare.
3. Get Your Child Care Plan Organized Now
Whether you’re a dual-income family or not, you’ll need to determine a child care plan. One of the most challenging parts of parenting as a couple is making time for your relationship. Start researching your child care options now for every need in the foreseeable future. While you’re at it, check with your employer to see whether you can allocate money to a flexible savings account. These accounts allow you to save pre-tax dollars toward eligible child care expenses, which can be a much-needed benefit.
First, consider when you’ll need care. If you’ll require child care during your work hours, ask trusted friends for recommendations. Set up tours of child care centers and get a firsthand idea of the service, safety, and cost. Some providers require a commitment of full-time care and often have rules around cancellations and vacation days. Get the whole picture of the options out there so you can make an informed decision.
Think about how you’ll get care for date nights, work travel, and vacations. Formal babysitters, trusted friends and family, and even au pairs are all possibilities to consider. Planning now for unexpected needs and anticipating time away from your baby can ease the stress on your budget. When you’ve vetted the cost and care, you can prioritize how and when you take time to recharge.
4. Project Long-Term Investments, Their Costs, and How You’ll Prepare Financially
Is your hatchback no longer a suitable mode of transportation? Are you currently cramped in your studio apartment? If you’re nodding, it’s time to prepare your finances for some changes. Making space for a baby in your life requires more than the mental decision of being “ready” for a child. You’ll also need to adjust how the things in your life work with the needs of a baby.
Some needs can be deferred until your child is older, but others must be addressed immediately. Infant travel systems are one of the high-ticket items when it comes to baby gear, but they’re non-negotiable. Research what fits with your lifestyle and budget. If you’re registering for gifts, prioritize listing the most important items like these to allow others to chip in.
Discuss whether your space needs an upgrade before or after your baby gets older. Create a plan for floor plan shifts, furniture purchases, and decor. These expenses can easily spiral out of control thanks to the cute factor and social media influence. If an address change is on the horizon, get familiar with any down payment and/or moving costs you’ll need to prepare for. Include these savings goals into your monthly budget so it’s a seamless transition when the time comes.
5. Prepare for the Future of Everyone in Your Family
The financial strain of having a baby may have you dizzy. Don’t let your overwhelmed feelings, or the superstore receipts, pull you away from your goals. Believe that you can identify and make the budgetary adjustments needed to be successful. Providing a solid financial foundation is part of the commitment you make when becoming a parent. Take pride in caring for and funding life’s needs as part of your parental duties.
Hold the line when it comes to your retirement savings, committing to increase contributions to the recommended 15% of earnings. If you haven’t started saving for retirement, set up an account as soon as possible. While it may seem counterintuitive, saving for your retirement is actually beneficial for your child. When you prepare for your future financial needs, it decreases the likelihood of your children needing to support you financially. Start small and aim for a mix of pre- and post-tax savings, based on your eligibility.
Advocate for your child’s future before they even get a Social Security number. Enroll in a state-sponsored 529 account and make contributions to their education savings as they receive monetary gifts. Your post-tax contributions are invested anticipating their future enrollment date, and the interest earned can be used tax-free. These accounts can be used for trade school, community college, and traditional institutions, and their flexibility makes these investments a no-brainer. Unused balances can be transferred to other children or a parent account for educational spending, a win for the whole family.
6. Welcome This Next Season of Life With Open Arms
Adding a child to your family is both exciting and nerve-wracking, and it requires relearning just about everything you do. You’ll push the limits of sleep deprivation more than you ever expected. But the sense of pride you’ll feel when you welcome your child will remind you of your new “why.” As your child grows, experiencing life through their eyes will be among one of your greatest joys.
Prepare for your family’s financial needs now so you can be fully present in your child’s life. Eliminating financial stress is impossible, but you can balance your budget and prepare for the future. By taking the time to budget while you’re expecting, you’ll be able to truly focus on the incredible moments ahead.