Expecting a new addition to your family in the upcoming months? In addition to the various emotions that you may be feeling, you may also be hearing that now is the best time to organize your finances. To assist you in putting a solid financial plan in place, we’ve outlined the top items to focus on before and after the arrival of your new baby.
Tip #1: Understand Your Health Insurance Coverage
It’s a good idea to start preparing for labor and delivery costs now. Reach out to your insurance company and ask what will be covered and what you'll need to pay out-of-pocket. Insurance is complicated, so put yourself in the driver’s seat and ask important questions in advance. This fundamental step will give you confidence and help you avoid surprises along the way. Ask about your copays and whether your plan covers specific options you're considering as part of your birth plan, like working with a doula, a lactation specialist, or obtaining equipment.
Once your baby is born, you will have 30 days to add your new bundle of joy to your health insurance plan. Check with your insurance provider to find out what they will need and when to make the addition, so you don’t lose track.
Post-delivery, request that your hospital provides you with an itemized bill so you can review all of the charges to ensure accuracy. That way, you can dispute any items that seem incorrect before going ahead and paying for them.
Tip #2: Update Your Family’s Budget
A baby will change just about everything in your life, including your spending habits. It's best to sit down before the baby arrives to assess your current debt and spending and saving habits. Don't leave anything out. Add in the anticipated costs of formula, diapers, doctor's visits, toys, clothing, and incidentals. Pull out the old-school pencil, paper, and calculator. Or use helpful online budgeting tools and make sure to factor in the following:
- The average newborn uses 8-12 diapers per day! Multiply that by the cost per box of diapers and how many days there are in the month, and you have your estimated monthly cost.
- Adjust your income numbers to account for future daycare expenses. If one parent plans to leave their job to stay home full-time, that presents a new set of budgetary considerations.
Don’t be afraid to over-budget! Start setting aside your monthly projected baby expenses in a dedicated account now. By the time the baby arrives, you can compare your budgeted figures with the actual costs – and have a strong savings cushion to fall back on.
Tip #3: Reduce or Eliminate Debt
When it comes to reducing or eliminating debt, there's no better motivation than having a baby on the way. Do everything you can to move toward living a debt-free life before the baby arrives, starting with evaluating your current debt and paying off your debt that has the highest interest rate first. You can also refinance your debt at a lower APR to save money in the long run, but do not drain your savings to do so – a healthy emergency fund is more important. Most importantly, do not take on more debt before paying off existing debt.
Tip #4: Don’t Buy Unnecessary Baby Gear
According to the Mayo Clinic, newborns grow an average of 1/2 to 1 inch a month and gain 5 to 7 ounces a week from birth to six months of age. Keep this in mind when it comes to baby clothes and gear. Don't be shy about accepting items such as a bassinet, swing, or lightly used clothing from family members and friends who are ready to pass items down. You'll return the favor and do plenty of passing down as your own child grows. Join local online parent groups, too, as they are great forums for sharing lightly used clothing and gear.
Try not to get caught up in registering for trendy baby gadgets. Start by asking family and friends what products to buy and what they used for their little ones. Diapers, wipes, and bottles are the most used baby items. Lastly, don’t be afraid to ask for gift cards or money to put towards the big-ticket items, like a crib or car seat. Friends and family can chip in to help you with these more expensive, but most important, necessities.
Tip #5: Providing Financial Security: Life Insurance Policies, College Savings, and Wills
Now that you have a new child to care for, it’s time to start thinking about their future as well.
- Life insurance policies help ensure that your loved ones, who depend on you financially, are protected.
- College is an expensive investment, so start reviewing the ways to fund a college education with a tax-advantaged education savings account such as a 529. Use this calculator to figure out how much you should be saving.
- If you don’t have a will in place, work with one of our financial advisors to create one so you can protect your assets and secure funds for your baby’s future. It’s also important to choose who will care for your child if anything should happen to you.
Welcoming a new baby to your family is a major life adjustment, but remember to take things one step at a time and enjoy the experience! Your baby will grow and continue to evolve every day and so will your financial plans. If you are ever feeling overwhelmed and need assistance, our Financial Advisors are happy to help guide you through some of these items and provide you with the tools you need to make the best financial decisions for you and your family.