Preparing to grow your family is not just picking out onesies and looking at ultrasounds. According to the USDA, it costs more than $233,000 to raise a child until age 17. That doesn’t even take into consideration the amount you put towards college education. Adding a member to your family will impact you financially which is why planning is crucial for a stable financial future.
Adjust your budget
Consider how your household income will be affected by unpaid parental leave once your new baby arrives. Make a schedule of how your expected income will be spent during this time to ensure that all expenses are covered. Ask about the costs associated with giving birth so you can set expectations. If you are thinking of staying home with the baby long-term, it’s essential to figure out if you need to cut spending to make one income successful for you and your family.
Check your emergency fund
Your emergency fund just became even more important! It’s no longer only you and your spouse anymore; now you have a baby to take care of. Check the amount in your emergency fund and continue adding to it if your budget allows. The more preparation your finances have, the easier the financial transition will be for you and your family. If you don’t have an emergency fund yet, now is the time to start! A savings of 3-6 months of living expenses is a strong start.
Review your insurance coverage
Look at the health insurance policies for you and partner and decide what makes the most sense moving forward, whether that’s one plan or two plans. Pay attention to the breadth of your plan network. Become familiar with coverage levels and consider some of the costs that may arise. If your employer offers a flexible spending account or health savings account, it would be smart to put some money into it for pregnancy-related expenses. Be sure you have sufficient life insurance in place in case of your untimely death.
Consider child care costs
If you are working parents this may be your number one concern. Child care is a huge added expense that can really throw off your budget! According to a recent study, the average cost of full-time care in child care centers for children 0-4 in the U.S. is $9,500 per year, higher than the average cost of in-state college tuition. Keep in mind that infancy is when child care is the most expensive. Your finances can play a big role in your child care decision and can be a determining factor in your decision to stay home with your baby, hire a part-time babysitter, or sign up your little one for daycare.
Look at the big picture
Adding a baby to your family can have an immediate impact on your finances but it can also affect your ongoing and future financial security. Plan for ongoing expenses such as necessities like food and diapers and think ahead to summer camps, piano lessons, after-school programs and even college.
There isn’t a one-size-fits-all approach to financial planning for starting a family. Consult a financial planning professional to discuss the best path to a secure financial future for your growing family.